A.B.N. 94 088 488 724
R E P O R T
2 0 1 2
CORPORATE DIRECTORY
Strike Resources Limited
A.B.N. 94 088 488 724
DIRECTORS
Chairman/Non-Executive Director
Mr Malcolm Richmond
Mr Ken Hellsten
Mr Matthew Hammond
Mr William Johnson
Ms Samantha Tough
Managing Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
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CHIEF FINANCIAL OFFICER
Mr Julian Tambyrajah
COMPANY SECRETARY
Mr Stephen Gethin
REGISTERED OFFICE
Level 2, 160 St George’s Terrace
Perth, Western Australia, 6000
Telephone
Facsimile
Local telephone
+61 8 9324 7100
+61 8 9324 7199
1300 974 700
WEB SITE
www.strikeresources.com.au
INFORMATION EMAIL
info@strikeresources.com.au
SHARE REGISTRY
Advanced Share Registry Services
Suite 2, 150 Stirling Highway
Nedlands, Western Australia, 6009
Telephone
Facsimile
Email
Website
+61 8 9389 8033
+61 8 9389 7871
admin@advancedshare.com.au
www.advancedshare.com.au
AUDITORS
BDO Audit (WA) Pty Ltd
38 Station Street
Subiaco, Western Australia, 6008
Telephone
Facsimile
Website
+61 8 9382 4600
+61 8 9382 4601
www.bdo.com.au
SOLICITORS TO THE COMPANY
Ashurst
Level 36, Grosvenor Place
225 George Street, Sydney, NSW 2000
Telephone:
Facsimile:
Website:
+61 2 9258 6000
+61 2 9258 6999
www.ashurst.com
STOCK EXCHANGE LISTING
Strike Resource Limited’s shares are listed on the
Australian Securities Exchange (“ASX”)
ASX Code: SRK
CONTENTS
Chairman’s Letter
Review of Operations
Company Overview
Corporate
Projects
Sustainability
JORC Resource Statement
Directors’ Report
Corporate Governance Statement
Auditor’s Independence Declaration
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes In Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Securities Information
Mineral Tenements
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Colcabamba Project, Apurimac
CHAIRMAN’S LETTER
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Given the scope and cost of this work and subsequent
studies and development costs, we believe this will be best
achieved through a strategic partnership agreement with
a larger company. This outcome represents tremendous
option value for Strike’s shareholders in both the near and
long term.
However, the alternative outcome would also deliver
signifi cant benefi ts to shareholders. If D&C Group takes
100% ownership of AF, Strike will move to a very strong cash
position with a repayment of loans by D&C Group in excess
of US$30 million. Given our already strong cash position
this would provide cash backing of at least $0.35 per share,
before the value of our investment in Cuervo Resources is
taken into account. This is turn would enable the Company
to consider a range of capital management options.
As we move toward the conclusion of ‘shoot-out’ process,
Strike’s Board, management, and I, look forward to the
change in direction for this company. We will either take
control of our key asset and secure a strong partner to
fund the next exciting stage of the Apurimac and Cusco
iron ore projects or move to a very strong cash position
which will provide valuable optionality in these times of
constrained capital.
If you have any questions regarding ‘shoot-out’ process,
please do not hesitate to contact either myself or Strike’s
Managing Director, Ken Hellsten, on 08 9324 7100.
Sincerely yours,
Malcolm R. Richmond
Chairman
Dear Shareholder,
On behalf of the Board of Directors and management of Strike
Resources, I would like to take this opportunity to further
discuss the ‘shoot-out’ process initiated May 18th 2012 with
our Perúvian partners D&C Group. The ‘shoot-out’ is designed
to produce a 100% ownership outcome of Apurimac Ferrum
SA (AF), the company which holds our Perúvian assets.
Both outcomes of this process are advantageous to Strike
Resources as they enable the Company to take control of
its future.
With the process underway, on August 3rd Strike made an
offer to D&C Group to acquire all shares in AF and assume
100% ownership of the company. Following submission of
this offer, D&C Group is required to either accept the offer or
make a superior counter-offer for ownership of AF.
If Strike’s offer is accepted by D&C Group, Strike will
repay D&C’s loans to AF of approximately US$3 million.
Alternatively, if a superior counter-offer is submitted by D&C
for 100% ownership of AF, Strike’s loans of more than US$30
million will be repaid along with the counter-offer price for
the shares.
I share the opinion of the Board and management that the
preferred outcome of ‘shoot-out’ process for Strike Resources
is 100% ownership of AF. This will give us control of unique,
high-grade iron ore assets which we can progress to the next
stage of development, a detailed pre-feasibility study.
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REVIEW OF OPERATIONS
COMPANY OVERVIEW
Strike Resources is an Australian-listed resources company
with two principal projects in the bulk commodities market.
The Apurimac and Cusco Iron Ore Projects are large-scale
iron ore projects in southern Perú, with Apurimac the most
advanced with an initial Pre-feasibility Study completed in
2008. The Company is seeking to establish the basis for a
15 – 20 million tonne per annum (Mtpa) operation based on
current JORC Indicated and Inferred Resources of 269Mt at
its Opaban concessions in the Apurimac District.
The Company has strengthened its resource and exploration
position in Perú through the acquisition of an additional 6%
of Apurimac Ferrum S.A. (AF) - taking Strike to 50% of AF -
and entering into a strategic option to acquire a major stake
in Cuervo Resources Inc. (Cuervo) which holds high-quality
exploration concessions in the Cusco district of southern
Perú, which are complimentary to Strike’s own concession
interests in the same area.
Strike holds 100% of the rights to mine coal at the Berau
Thermal Coal Project in Indonesia, subject to a royalty to
the concession owner, through a Co-operation Agreement.
The Company was in dispute with the owner over the terms
of the agreement but reached in-principle agreement on
a settlement in September, 2012 where Strike will receive
US$4.3 million for its rights in the project.
Operational Highlights
Operational Highlights of the fi nancial year ending 30 June
2012 and to the date of this report include:
• Buy-out of the minority shareholder (IAC) in AF in
July2011 and subsequent receipt of US$1.9 million from
D&C to move from 44% to 50% ownership of AF.
• Agreement reached with Cuervo Resources to loan
C$5.25 million in return for warrants entitling Strike
to 32.5% of Cuervo’s shares with an option to loan a
further $9.75 million and move to 49% (undiluted) or
46% diluted.
• Drilling underway at Cerro Ccopane (Cuervo) project with
ten holes completed so far targeting the ‘Bob 1’ zone
which comprises strong surface mineralisation over a
strike length of 3 kilometres. Assay results reported for
the initial 7 holes over a strike length of 500 meters
demonstrate substantial widths of mineralisation with
some zones containing 50 – 60% Fe.
• Rothschild appointed as corporate advisor to assist
with ‘shoot-out’ process and identifi cation of potential
strategic investors to develop Apurimac and Cusco
projects over the long term.
•
•
Initiation of the “shoot-out’ provision in Settlement
Agreement negotiated with Perúvian partner D&C Group
in July 2009, providing the Company with a unique
opportunity to optimise its asset portfolio in Perú by
potentially acquiring 100% ownership of Apurimac
Ferrum (AF).
Shoot-out offer price lodged 6 August for a total
consideration of US$3.2 million to acquire D&C Group’s
50% interest in Apurimac Ferrum SA and repay its loans
to AF.
• Community Relations team strengthened and revised
plan to gain access to Opaban project progressing
well,though local opposition may take some time to
address.
•
Signifi cant progress at Santo Tomas (Cusco) with IP
and mapping programs completed, environmental
studies well advanced and successful community
consultationprocess for drilling approvals.
REVIEW OF OPERATIONS
• Negotiations regarding Berau dispute advanced further
toward achieving a settlement.
•
•
Strong cash balance retained by Strike with A$20.6
million in cash.
Strike also holds secured loans to AF and Cuervo of
approximately A$34 million and CAN$5.25 million
respectively.
APURIMAC FERRUM - “Shoot-out”
PROCESS
PROCESS
SRK gives Shoot-out
advice
SRK prices bid
Shoot-out
MARCH 2012
MAY 2012
JUNE 2012
AUGUST 2012
AUGUST 2012
OCTOBER 2012
OUTCOMES
D&C
44%
SRK
56%
D&C pays SRK
US$1.9M
for 6% AF
D&C
50%
SRK
50%
SRK wins
D&C wins
SRK
100%
D&C
100%
Strike will have 100% of AF or $30M additional cash
SRK receives US$30M + bid price
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REVIEW OF OPERATIONS
CORPORATE
Strategy
Strike Resources is focused on further growing the resource
base of its large scale iron ore projects Apurimac and Cusco
in southern Perú. Development of Apurimac and Cusco into a
viable 15-20 Mtpa iron ore business will require an estimated
capital expenditure of US$2.9 billion. Initial pre-feasibility
studies conducted to evaluate infrastructure developments
for processing and delivery of iron ore reserves has indicated
positive economics for the project if the resource base at
Apurimac is > 500 million tonnes (Mt) or Cusco > 700m Mt for
independent development.
Accordingly the Company’s focus is continuing to advance
exploration activities and project studies at Apurimac,
undertaking and supporting drilling programs conducted at
Cusco and identifying business development opportunities
to expand its iron ore resources and exploration potential.
Signifi cant progress has been made towards this end
over the past year through strengthening the AF team,
maintaining strong constructive relationships with the
Company’s Perúvian partner D&C, consolidating the equity
position in Apurimac Ferrum and establishing itself as the
major iron ore concession holder in Andean southern Perú.
Moving forward Strike Resources will look to work with
corporate advisor Rothschild to leverage from its strong
asset position by undertaking a program to secure a
strategic investment partner to bring its projects into a
development stage over the medium and longer term.
With a long term investment partner secured, Strike
Resources will have the economic and strategic backing to
develop and further grow its unique iron ore assets into the
future.
Key Appointments
Mr Julian Tambyrajah joined Strike as Chief Financial Offi cer
on 2 April 2012. Mr Tambyrajah brings a wealth of resource
industry fi nance, commercial and operations experience
and has a broad industry network, especially across the
Asia-Pacifi c region. He has taken the leadership role in the
settlement of the Berau dispute.
On 1 June 2012 AF appointed Mr Luis Romero Elmore to
the role of Manager - Social Responsibility. Mr Romero has
extensive experience in the community and government
relations areas in the Perúvian mining industry, in similar
situations to AF’s projects. He will be responsible for gaining
the necessary access approvals for AF’s Apurimac and Cusco
iron ore projects.
Organisational Restructuring at Apurimac
Ferrum
Strike’s 50% Perúvian joint venture company Apurimac
Ferrum (AF) has undergone a restructure in preparation
for the results of the shoot-out. The restructure also
aligns staffi ng levels with current community relations and
exploration activities while positioning it for rapid expansion
once approvals are received.
As previously announced, either Strike or its joint venture
partner D&C will move to 100% ownership of AF under the
shoot-out process. The party that wins the shoot-out will
integrate AF into its own operation, resulting in the need to
reduce staffi ng levels at that time. The restructure serves to
bring this process forward.
AF staff numbers have been reduced from 35 to 12, with
the majority of the remaining roles being fi eld based.
Strike personnel will continue to provide support for AF’s
operations while consulting and contractor costs will reduce
until fi eld programs accelerate as approvals fl ow.
Under the restructure AF Finance Manager Cecilia Arce
was appointed Acting General Manager, replacing outgoing
CEO Tom Kelly. Ms Arce is an experienced fi nance and
management professional, having worked at a senior level in
the Perúvian operations of various multi-national companies
before she joined AF in 2010.
The restructure is expected to realise cost savings of
approximately US$250,000 per month from the December
quarter onward.
D&C Payment for IAC Transaction “Top-Up”
Complete
During September 2011 D&C exercised its option to acquire
half (6%) of the 12% AF shareholding and loans (US$5.245
Iron Associates
million) which Strike acquired from
Corporation (IAC). Under that agreement D&C was required
to pay Strike US$1.9 million upon certain regulatory
requirements being met.
D&C paid Strike this amount on 22 June 2012 after the
regulatory requirements were met and the transfer of the
shares to D&C has been completed, bringing Strike’s holding
in AF to 50% and total cash reserves at 30 June 2012 to
approximately A$20.6 million.
AF Shoot-out Update
On 18 May 2012 Strike announced that it had triggered the
“shoot-out” process under the AF Settlement Agreement
(SA) negotiated in July 2009 with its Perúvian partner, the
D&C Group.
Once triggered, the “shoot-out” process requires Strike to
make an offer to D&C to acquire 100% of its shares in AF,
in addition to repaying D&C’s loans to AF, in the amount of
approximately US$3.2 million1. Strike was required to give
D&C the shoot-out offer by 6 August 2012. D&C then has
60 days to either accept Strike’s offer or make a superior
counter-offer, including the re-payment of Strike’s loans to
AF in full.
Accordingly, the shoot-out process provides Strike with a
unique opportunity to optimise its asset portfolio in Perú,
resulting in Strike either:
• owning 100% of AF; or
REVIEW OF OPERATIONS
• divesting its shares in AF for cash consideration and
having its current and future loans to AF (currently
estimated at approximately A$34m) repaid in full.
Both these alternatives are considered superior to the re-
capitalisation plan which would have eventuated if Strike
had not triggered the shoot-out process with D&C. Under
that scenario, Strike was to capitalise its then US$30 million
in loans to AF in exchange for only an additional 18% equity
interest in AF.
As previously noted, the Strike Board appointed Rothschild
to provide independent strategic and fi nancial advice in
relation to the shoot-out offer. Rothschild has undertaken
a market valuation process for AF’s assets to assist the
Board determining the optimum shoot-out offer price. A key
infl uence on the valuation is the current state of fi nancial
markets, with investors being risk averse.
On 6 August the Company submitted its offer to D&C to repay
its loans to AF and purchase all their AF shares for a cash
consideration of US$3.2 million. This offer was based on the
Rothschild assessment of the current valuation of the AF
assets and liabilities which include the Apurimac and Cusco
projects and outstanding loans.
D&C has until 3 October to accept this offer or pay Strike
at least US33.8 million for its AF shares and loans. D&C is
currently undertaking an international search to secure
a partner to fund the acquisition of Strike’s shares and
loans in AF. Given the status of the resources and fi nancial
markets as noted above the Company believes the most
likely outcome of the shoot-out will be it moving to 100%
ownership of AF.
1 As at 25 May 2012 D&C’s loan to AF was US$600,000. Since then D&C acquired a loan to
AF in the amount of approximately US$2.6m from Strike in the transaction described
above, bringing D&C’s total loans to AF to US$3.2m.
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SHOOT-OUT
POTENTIAL
OUTCOMES
OUTCOME #1
• Strike acquires 100% of AF at the offer price
• Strike repays D&C’s loans to AF of approx. $3.2M
OUTCOME #2
• Strike sells D&C its AF shares for the counter-offer price
• Strike is repaid its loans to AF of
- US$34M (bringing its total cash to
- A$0.38 per share
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REVIEW OF OPERATIONS
Millenium Legal Dispute
On 8 October 2010 AF commenced arbitration proceedings
against Perúvian Company Millenium Trading SAC
(Millenium) to settle the terms on which Millenium
may conduct a small-scale mining operation on an AF
concession.
Under a 2006 agreement under which AF acquired certain
mineral concessions (Option Termination Agreement) AF
agreed to permit Millenium to mine up to 400,000 tonnes
of iron ore per annum for 5 years on an unspecifi ed
AF concession, on terms to be agreed by subsequent
negotiations (Mining Agreement). In return Millenium
agreed with a third party, Minera los Andes y el Pacifi co
(MAPSA), to relinquish options over certain mineral
concessions to enable MAPSA to sell them to AF.
AF and a Millenium-appointed party subsequently
commenced negotiations for a Mining Agreement. The
Millenium party ceased negotiating in 2007 with no
agreement having been reached. In late 2010 Millenium re-
asserted its right to enter into the Mining Agreement with
AF but also rejected AF’s approaches to enter into good
faith negotiations for that purpose. AF considered that
was appropriate to refer the matter to arbitration given
that the terms of the Mining Agreement were not resolved
by negotiation in 2007 and given Millenium’s refusal to re-
open good-faith negotiations in 2010.
After AF commenced arbitration Millenium commenced
court proceedings claiming that the Option Termination
Agreement should be set aside. AF has asked the court
to decline jurisdiction over Millenium’s claim on the basis
that arbitration is the proper forum for that dispute
according to the Option Termination Agreement.
An arbitration hearing to defi ne the issues in dispute
was held on 27 April 2012. The arbitrator agreed with
AF’s proposed statement of the issues to be resolved.
A further hearing was held on 16 May 2012 to determine
certain questions about the arbitrator’s jurisdiction
before the substantive hearing to resolve the dispute
could be scheduled.
In early July 2012 the arbitrator asked the parties to make
submissions about which concession would be most suitable
for Millenium to conduct this operation. Submissions were
made in August and a decision on this matter and the
jurisdictional question is pending. AF has had legal advice
that it has good prospects of defeating Millenium’s claim.
Any mining operation of the type contemplated by the
Concession Acquisition Agreement will not materially affect
AF’s own proposed mine.
Business Development
Business development activities in Perú have been placed
on hold during the shoot-out process. Ian Cullen resigned
as Business Development Manager under an agreed
termination.
The Company will evaluate re-commencing business
development programs in South America in light of the
shoot-out outcome and political and social conditions in
Perú and across the region late this year.
Cash Position
Strike’s total cash holding on 30 June 2012 was
approximately A$20.6 million. In addition, Strike holds a
loan of CAD$5.25 million to Cuervo Resources Inc and loans
of approximately A$34 million to Apurimac Ferrum.
REVIEW OF OPERATIONS
PROJECTS
Apurimac Iron Ore Project (SRK 50%2)
Background
AF holds concessions covering almost 600 square kilometres
in the Andahuaylas-Yauri
of highly prospective ground
province in the Apurimac district of southern Perú. Historical
work done by the Perúvian Government’s Department of Mines
and the Takahashi Trading Company indicate potential iron ore
mineralisation in the Apurimac project of 700 Mt at 58% to
62% Fe.
(The potential quantity of the target iron ore mineralisation is
conceptual in nature. There has been insuffi cient exploration
to defi ne an additional Mineral Resource in relation to that
target iron ore. It is uncertain whether further exploration will
result in the determination of an additional Mineral Resource
in relation to that target iron ore.)
The most advanced prospect, Opaban, currently contains
iron ore resources totalling 269 Mt at an average grade of
57.3% Fe3. The resources are high quality, being dominantly
course-grained and friable magnetite, which provides several
competitive advantages. The high grade provides excellent
potential for direct shipping ore (DSO) as well as high quality
products using conventional magnetic separation techniques.
Metal recoveries are more than twice that seen in most
magnetite deposits and the coarse-grained nature of the ore
provides signifi cant energy savings as only coarse grinding is
required to liberate the magnetite. The combination of these
factors delivered a project with competitive capital costs and
low operating costs in an initial Pre-feasibility Study (PFS)
completed in 2008.
The current focus of AF’s activities is to increase its iron
ore mineralisation to at least 500Mt at similar grade to the
Opaban deposit to support the establishment of a 15 – 20 Mtpa
iron ore business.
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(This mineralisation target is conceptual in nature and there
has been insuffi cient exploration to defi ne a mineral resource.
It is uncertain whether further exploration will result in the
target being delineated as a mineral resource).
Priority targets are:
•
•
•
•
300 to 350 Mt at 56% to 62% Fe on the Opaban 1 and 3
concessions. The Opaban Resource remains open along
strike and at depth as well as holding potential for
parallel mineralised systems. The existing Resource was
established by drilling magnetic and gravity anomalies. It
is planned to test several magnetic and gravity “highs”
identifi ed by the same surveys but as yet untested by
drilling.
Increasing the Indicated and Measured proportions of
the Resource at Opaban 1 and 3 to the level which would
support completion of mining reserve estimates.
Ironstone outcrops and magnetic targets on the
Colcabamba, Sillaccassa, Cristoforo and other high-
priority “satellite” concessions.
Pursing opportunities to consolidate concession holdings
through acquisition, joint ventures or other transaction
transaction structures.
2 Strike holds its interest in this project via a 50% shareholding in
Perúvian company, Apurimac Ferrum SA, which holds the project’s
mineral concessions.
3 Comprised of an indicated resource of 142.2 Mt at 57.84% Fe and an
inferred resource of 127 Mt at 56.7% Fe.
REVIEW OF OPERATIONS
Colcabamba
The Colcabamba project is 30km to the south of the Company’s
Opaban concessions, and is considered to be a potential
satellite deposit. The iron mineralisation is hosted by
regional metasomatic skarns developed in both limestone
roof pendants and diorite within the Andahuaylas-Yauri
batholith. Although high-grade magnetite mineralisation was
intersected in all of the eight holes which were drilled in 2011,
the mineralised intersections were generally narrower than
expected when interpreted as being controlled by sub-vertical
structures.
A review of the geological controls and setting of the iron
mineralisation at Colcabamba was completed in the December
2011 quarter by experienced Andean geological consultant
Dr Warren Pratt. Key conclusions from this work were:
• Magnetite mineralisation is mainly located within the
exoskarn and is probably stratiform, following the contact
between a semi-regional batholith and the overlying (sub-
horizontal) host limestone rock. This contrasts with the
steeply dipping mineralisation model used in the original
interpretation of the drilling results.
• Magnetite mineralisation is formed as a retrograde skarn
which overprints an earlier garnet and diopside skarn
alteration assemblage.
•
•
The current geological model may have underestimated the
iron-ore potential at Colcabamba.
The presence of multiple phases of
intrusives,
anomalous copper and relatively high sulphur content at
Colcabamba make it strongly prospective forcopper/gold
mineralisation including skarn, epithermal and porphyry
styles.
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Colcabamba drilling access camp 2011
Minor levels of gold and copper were intersected during the
original drilling program.
Geological mapping was completed over the area to which AF
has access, and stratiform alteration zones were identifi ed as
well as structurally controlled magnetite zones. The relative
importance of the two mineralisation styles needs to be
tested by drilling.
A drilling program was planned and the necessary permits
obtained. However, immediately prior to mobilisation of
the rig the community Mayor was challenged and a change
of community leadership occurred. The new leadership
demanded signifi cant cash payments in addition to the
employment, social and infrastructure programs previously
agreed with the community.
Accordingly, after further consultation and continued demands
from the new leadership, AF halted the mobilisation of
its drilling rigs and all community programs. AF has now
withdrawn from Colcabamba and does not intend to return
until the community agrees to honour the current agreement.
If access is gained AF will undertake an IP program and the
planned drilling, however, as this prospect is not considered
vital for the Apurimac iron ore project, no further work will
be done until the existing agreements are honoured by the
community.
REVIEW OF OPERATIONS
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Iron ore at Colcabamba
Activity
Opaban
AF has completed re-logging the Opaban drill core as part of
its program of maximising the value of the current data and
resources. This work focussed on quantifying the relative
importance of the stratiform and steeper structurally
controlled magnetite mineralisation and fi ne tuning drilling
targets to extend the current resource once access is
gained. This work is expected to be completed during the
December quarter.
large, high-quality
The Opaban deposit represents a
magnetite deposit which has excellent physical and
metallurgical characteristics with the potential to represent
the core of a 15 – 20 Mtpa iron ore business. The deposit
remains open along strike and at depth and the potential
exists for adjacent magnetite mineralisation represented by
existing untested magnetic and gravity anomalies with the
Opaban concessions.
AF intends to undertake drilling to fully defi ne the Opaban I and
Opaban III deposits as well as test these exploration targets
once approvals are received from the relevant communities.
Apurimac Satellite Concessions
AF has undertaken an initial evaluation of the Apurimac
concessions outside the core Opaban area. This work has
included detailed airborne magnetics over part of the
concessions as well as regional reconnaissance work
including rock chip sampling and an independent review of
remote sensing imagery data.
While this remains work in progress a number of attractive
exploration targets have been identifi ed which warrant
additional fi eld work including drill testing. These include
the Sillaccassa area where two zones of extensive magnetite
outcrop have been mapped coincident with strong magnetic
anomalies, the Ferrum and Cristoforo concessions where
magnetic targets will be followed up with geological
mapping, initial drill testing of areas of magnetite skarns
identifi ed by geological reconnaissance along with a range
of prospective iron ore and copper/gold targets identifi ed
from the remote sensing review.
AF intends to test these targets as community approvals for
access are progressively received.
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REVIEW OF OPERATIONS
Cusco Iron Ore Project, Santo Tomas
(SRK 50%4)
Background
The main Cusco project area of Santo Tomas is centred on a
large 2 kilometre diameter circular magnetic anomaly with
north and north-east trending magnetic highs extending both
north and south of the circular feature. Extensive outcrops
of high-grade iron ore coincide with the magnetic anomalies.
Mapping and surface sampling indicates these outcropping
zones commonly contain >60% Fe and contain a mixture of both
haematite and magnetite.
A resource estimate completed in 2011 based on the 2008
drilling outlined an Inferred Resources of 104.4 Mt of iron ore
at 32.6% Fe. The mineralisation remains open along strike and
at depth. In addition, due to the broad nature of the drilling, a
number of mineralised intercepts could not be included in the
resource estimate.
This resource estimate was based on primarily steep-
dipping, structurally controlled magnetite zones. The
current interpretation of the deposit is that the bulk of the
mineralisation is stratiform in nature and sub-horizontal with
the current resource estimate believed to understate the
resources and potential in terms of both tonnes and grade.
At this stage a revised resource estimate is not considered
essential until further drilling is completed.
The drilling programs to date have tested 30 – 40% of the target
area for iron ore and further drilling is planned. The style of
iron-ore mineralisation at Santo Tomas is similar to that seen
at Opaban, being coarse-grained and dominated by magnetite.
Preliminary metallurgical tests indicate a concentrate grade
of >65% Fe can be produced from this ore using conventional
grinding and magnetic separation processes.
A Concept-level study was completed in 2008 into a 1 Mtpa
operation producing a lump product trucked 275 kilometres
to Imata then railed to the port of Matarani for storage and
export. The study indicated a capital cost of approximately
4 Strike holds its interest in this project via a 50% shareholding in Perúvian company,
Apurimac Ferrum S.A., which holds the project’s mineral concessions.
Drilling at Cusco Iron Ore Project 2007/8
US$160 million and operating costs of US$75 per tonne, which
is not considered suffi ciently attractive to pursue further.
AF’s Cusco concessions lie within 20 km of the Cerro Ccopane
iron ore project of Cuervo Resources where iron ore resources
of 179 Mt at an average grade of 48% Fe (see below for full
details) have been outlined and drill testing of the exciting
Bob 1 target area is underway.
Activity
Following completion of the access agreement with the
community of Huinquiri during the fi rst half of 2012 AF has
initiated a number of exploration and drilling approvals
activities within the central portion of the Santo Tomas
project in the Cusco district.
Surface mapping program, re-logging of drilling samples
and an IP program were undertaken in the current work area
and these programs will be extended as more areas become
available.
The results of the mapping and re-logging programs confi rmed
that the mineralisation is largely in stratiform exoskarn. The
data from this work will be used to defi ne criteria for a revised
resource estimate to be undertaken in the future.
The IP survey provided signifi cant data for both iron ore
and copper-gold exploration. It confi rmed the dominantly
stratiform nature of the iron ore and also identifi ed a
number of moderate-sized deeper chargeability anomalies,
which most likely outline sulphide-rich portions of the
system. At this stage it appears that these targets are more
likely to represent primarily gold targets, but drill testing is
required to confi rm this interpretation.
This will be included in the drilling approvals process which
is proceeding as planned. Initial environmental studies have
been completed and presented to the community, which
confi rmed its support for AF’s presence and exploration
programs.
Drilling is expected from the June quarter of 2013 once all
drilling and water supply approvals are received.
In addition to exploring the AF concessions the Company
has also pursued opportunities to secure additional iron
ore resources within the Apurimac and Cusco regions to
accelerate the delineation of suffi cient mineralisation to
support a 15 – 20 Mtpa operation. Two important steps
completed have been the move to a majority position in
AF through the acquisition of the 12% of shares in AF held
by IAC (see Strike’s announcement: “Strategic Acquisition
Apurimac/Cusco Iron” on 1 July 2011) and the entry into
a loan agreement with Cuervo Resources (see Strike’s
announcement: “Strategic Option to Acquire Major Stake in
Cuervo” on 17 June 2011).
REVIEW OF OPERATIONS
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Cusco Iron Ore project magnetite outcrop
Drilling at Cusco Iron Ore project 2007/8
REVIEW OF OPERATIONS
Cuervo Resources Inc.
Background
Cuervo Resources Inc. (CNSX code: FE) is Canadian mineral explorer listed on the Canadian National Stock Exchange (“CNSX”) and also
trades on the Frankfurt Stock Exchange. Cuervo is active in exploration for iron ore in Perú, most particularly at its wholly-owned Cerro
Ccopane project lies within 20 kilometres of Apurimac Ferrum’s Santo Tomas (Cusco) iron ore project (refer Figure 1). Cuervo and Strike
believe that a cooperative exploration effort between them will be strategic to the development of Perú’s large-scale iron ore potential.
Figure 1: Regional Geology and AF and Cuervo concessions in southern Perú
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Cuervo Resources, magnetite Aurora zone 2011
The Cerro Ccopane property covers 14,000 ha (140 square
kilometres) of contiguous mineral concessions. At Cerro
Ccopane (Figure 2), drilling in 167 holes in four zones
of magnetite mineralisation has
identifi ed high-grade
magnetite mineralisation at the Aurora, Orcopura, Hullique
and Bob 1 prospects (see Figure 2).
The Orcopura Zone has a reported JORC-Code compliant
mineral resource estimate of 106.4 million tonnes at 45.3%
Fe which is detailed at Table 7 in the Resource Statement
(page 24). The Orcopura mineralisation has been tested over
a strike length of approximately 800 metres and remains
open along strike and down dip in several areas.
The magnetite mineralisation exhibits a clear geophysical
expression with strong magnetic and gravity anomalies
coincident with the iron ore.
The Bob 1 zone is considered highly prospective for iron ore.
It contains strong magnetic and gravity anomalies (refer
Figures 1 and 2) coincident with a broad band of magnetite
outcrops extending over 3 kilometres in strike length, the
largest yet identifi ed on the Cerro Ccopane property. Rock
chip samples from these outcrops averaged >63% Fe and the
prospect is geologically similar to the Orcopura, Huillque and
Aurora areas where previous drilling has outlined iron ore
resources totalling 179 million tonnes at an average grade
of 48.2% Fe (refer Table 7, at page 21, for a full breakdown of
JORC Code categories and grades).
Strike has provided funding of the drilling program on the
Bob 1 zone as part of a staged exploration program by
Cuervo at its Cerro Ccopane project. Strike has advanced
Cuervo CAD$5.25 million for the current (Stage 1) program
and, in return, was granted warrants that can be converted
into 32.5% of Cuervo’s shares on an undiluted basis. Strike
has the option to fund Cuervo’s Stage 2 drilling program in
the amount of CAD$9.75 million, under warrants which can be
converted to a further 16.7% of Cuervo’s shares (undiluted).
REVIEW OF OPERATIONS
Figure 2: Magnetic Data and Prospects for Cerro Ccopane Project, Cuervo Resources.
182 500 mE
187 500 mE
192 500 mE
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7
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7
3
4
8
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N
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7
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8
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3
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8
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Concession not held by Cuervo
REVIEW OF OPERATIONS
Activity
At the time of investment in July 2011, initial drill testing of the magnetic anomalies at the Huillque and Aurora prospects
had intersected broad zones of iron ore mineralisation, however a resource estimate was not completed at that time.
Better results from drilling at these zones include:
Table 2 - Selected intercepts from Huillque and Aurora prospects
Interval (m)
Width (m)
True Width
HOLE ID
HDH – 01
62.7 – 138.5
HDH – 03
129.80 – 228.50
HDH – 12
HDH – 17
ADH – 01
ADH – 01
130.25 – 181.10
21.20 – 132.30
8.70 – 87.20
17.70 – 59.70
ADH – 06
35.50 – 114.00
78.85
98.7
50.85
110.6
78.5
42
78.5
53
69
35
55
29
68
The full list of signifi cant intercepts from these zones is
provided at Appendix 1 of a Strike announcement dated 17 July
2011 (Strategic Option to Acquire Major Stake in Perúvian Iron
Ore Explorer).
In early 2012 a further resource estimate was released for
the Aurora and Huillque prospects, which lie approximately
3 kilometres to the south west and north respectively of
Cuervo’s previously reported resources at the Orcopura
prospect (see fi gure 2, on page 15). The new resource estimate
is based on the results of approximately 5,000 m of diamond
drilling and based on a 30% iron cut-off grade. The breakdown
of the resource by mineralised zone is shown below:
Table 3 – Resource Aurora and Huillque
Zone
Mt (Inferred)
Head Fe (%)
Aurora South
Aurora North
Huillque
Total
7
9
56
72
49.7
49
53.5
52.6
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Fe%
62.09
54.55
53.66
49.92
50.77
58.73
51.05
S%
0.8
4.14
1.51
2.27
3.64
3.71
3.46
P%
0.03
0.04
0.05
0.05
0.03
0.02
0.03
Prospect
Huillque
Huillque
Huillque
Huillque
Aurora
Aurora
Aurora
The revised global resources on the Cerro Ccopane property,
which includes all drilling performed on the Orcopura, Aurora
and Huillque prospects, now stand at 179 million tonnes at an
average grade of 48.3% Fe, as outlined in the table on page 25.
In late 2011 Cuervo commenced an access program for a 4,500
metre diamond-drilling program at the “Bob 1” zone of its Cerro
Ccopane Iron Project in southern Perú. As part of this work it
completed a channel sampling program in costeans across
areas of outcropping or inferred magnetite rocks.
A total of 460 m of channel sampling (360.3 m in horizontal
length) has been carried out along fourteen E-W trenches
(numbered “A” to “J” from south to north) across N-S
outcropping magnetite mineralisation over a strike length of
1,000 metres. Analytical results from the channel samples are
very similar to those encountered near surface in the other
mineralised zones identifi ed elsewhere at the Cerro Ccopane
property. Included in the Bob 1 sample results are intersections
of 46.44% Fe over 38 m (46.49% Fe over 35.6 m horizontal)
in Trench A and 50.13% Fe over 60 m (50.08% Fe over 43.3m
horizontal) in Trench D.
REVIEW OF OPERATIONS
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Drilling commenced in June 2012 and to date 10 holes have been completed of a planned program of up to 20 drill holes at Bob 1. One
hole, BDH12-09 was abandoned prior to reaching the target depth due to drilling diffi culties. These drill holes have been directed to
test the surface exposures of magnetite mineralisation and the gravity and magnetic targets to a depth of around 200 metres.
All 10 drill holes completed to date at Bob 1 have intersected broad zones of magnetite rich rocks with several intervals of massive magnetite
interspersed with relatively narrow intervals of intermediate composition intrusives. The magnetite and sulphides (mainly pyrite) are
generally of similar grain size to that seen at Cuervo’s Orcopura prospect approximately 20 kilometres to the SSW (refer Figure 2).
Assay results have been received and reported for the initial 7 drill holes (BDH12-01 to 07) which test approximately 500 metres of
strike length in the central portion of Bob 1. Broad intervals (90 to almost 190 metres down hole) of iron with grades above 30% Fe
have been intersected in every hole, with several holes containing zones of 50 - 60% Fe.
Table 4 - Signifi cant intersections in drill holes BDH-12-01 to BDH-12-07
Hole
From
To
Length
Fe (%)
SiO2 (%)
S (%)
P (%)
Mn (%)
Cu (%)
BDH12-01
86.20m
219.20m
133.00m
BDH12-02
BDH12-03
BDH12-04
12.35m
19.20m
66.10m
194.35m
182.15m
175.20m
156.00m
255.00m
188.90m
BDH12-05
35.80m
179.55m
BDH12-06
71.30m
BDH12-07
219.45m
181.90m
311.45m
143.75m
110.60m
92.00m
49.6
39.6
40.9
32.6
38.3
41.1
36.6
14.4
23.2
23.3
28.5
22.6
21.1
24.5
2.36
2.3
2.92
1.8
1.83
2.79
2.64
0.09
0.08
0.06
0.08
0.09
0.08
0.07
0.14
0.16
0.19
0.23
0.2
0.17
0.22
0.11
0.1
0.12
0.06
0.08
0.10
0.09
Within these broad mineralised zones, higher-grade intervals
have also been identifi ed, including:
• 51.6% Fe over 21.05m from 103.45m and 52.8% Fe
over26.0m from 140.50m in BDH12-02;
• 49.9% Fe over 24m from 122.70m, 61.6% Fe over 13.85m
from 77.05m and 50.3% Fe over 43.35m from 107.15m
in BDH12-03; and
• 55.9% Fe over 22.50m from 66.10m in BDH12-04.
Given the challenging site access in some areas at Bob 1,
in some cases both vertical and angled drill holes have
been completed from a single drill platform to provide
both a horizontal and vertical assessment of the magnetite
mineralisation. Holes 03, 05, 06 and 07 were declined at
60 degrees, with the remaining holes being vertically
orientated.
Preliminary low-intensity magnetic separation (Davis Tube)
carried out previously on selected samples of sulphide-
rich mineralisation from the Orcopura zone showed that
both pyrite and chalcopyrite (Cu-bearing sulphide) could
be removed to produce a high-grade iron ore concentrate.
Cuervo plans to carry out Davis Tube processing on samples
of the Bob 1 ore when more drill holes have been completed.
The Bob 1 David Tube results are expected to be similar
to those from Orcopura, given the similarity in magnetite
mineralisation at these prospects.
While only a restricted portion of the target area has been
tested to date the results are considered most encouraging due
to the continuity of results both along and across strike, the
strength of the geophysical anomalies and presence of massive
magnetite at surface over the entire strike length of Bob 1.
Cuervo expects drilling to continue until at least late October
and is aiming to have an initial resource estimate completed
by late 2012 or early 2013, depending on drilling rates and
assay turnaround times. For the remainder of the current
drilling program it is planned to undertake step-out drilling
to the north and south of the completed holes to provide an
initial test of the bulk of the Bob 1 target area.
REVIEW OF OPERATIONS
Figure 3: Bob 1 Prospect Gravity Contours and Drill Hole Locations
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REVIEW OF OPERATIONS
Berau Thermal Coal Project – Indonesia5
Overview of Previous Studies (2009 – 2010)
The Berau Project is located 40 kilometres south-west of Tanjungredeb (Berau) and 350 kilometres north of Balikpapan, East
Kalimantan, Indonesia. Strike has a 100% interest in the rights to mine a mineral concession (IUP) and sell the product, subject to
payment of a royalty to the IUP owner.
The project straddles the Kelai River with the focus for both exploration and studies being initially the Nyapa West area on the
western side of the river which hosts over 50% of the resources and has simpler access (see Figure 4 below).
Figure 4 – Berau Drilling and Geology Map
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5 Strike’s rights in this project consist of 100% of the rights to mine the coal concession, subject to payment of a royalty to the concession owner.
REVIEW OF OPERATIONS
In February 2010 the Berau project coal concession was
converted to a Mining Production Operations Licence (Izin
Usaha Pertambangan Operasi Produksi or IUP Production
Operations) under Indonesia’s new Mining Law. Obtaining
the IUP Production Operations is a key pre-requisite for the
conduct of mining activities. This licence allows the mining
and sale of coal, subject to fi nal approval of the fi rst year’s
annual budget and work plan by the Regent of Berau.
Other granted approvals include the Special Area Port
License.
Central Forestry approval for the alignment of the proposed
mine-site to barge-port haul road and Regional Forestry
approval of logging of trees in the area that will be disturbed
by the mining operation have been granted, subject to
completion of cataloguing tree species and quantities in the
area of disturbance.
Analysis of tenders was undertaken in 2010 along with
a second round of mining contract proposals. This work
confi rmed the key capital and operating cost components
of the project determined during the 2009 feasibility study.
Current Status
During the year management held extensive discussions
with Strike’s Indonesian partner with a view to reaching
agreement on the restructure of the existing Cooperation
Agreement to ensure it complies with the new Indonesian
Mining Laws. Despite these efforts the partner has refused
to negotiate in good faith.
During the June and September 2012 quarter, discussions
continued with Strike’s Indonesian partner with a view
to resolving the dispute between the parties. These
negotiations have resulted in the executing of a Term Sheet
with the Indonesian partner to settle the dispute, under
which Strike has agreed to exit the project for US$4.3M.
Just prior to signing the Term Sheet the Company had taken
a conservative view and impaired the carrying value of the
asset based on negotiations at that stage.
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Berau concession location map
A series of feasibility level studies were completed by Strike
in 2009 based on mining and transporting run-of-mine coal
by truck approximately 30 km along a proposed haul road
to a barge port to be constructed on the Segah River, where
it will crushed and stockpiled prior to loading on barges.
Barges then transport the coal approximately 90km to the
coast and then on to a trans-shipment point 30km offshore,
where it will be off-loaded to ships for delivery to customers.
The target production was 1.5 Mt of coal in the fi rst year,
expanding to produce at a rate of up to 3 Mtpa in subsequent
years. The run-of-mine coal product was expected to have a
medium calorifi c value of approximately 5,550 kcal/kg (gar)
with low sulphur (0.66%S as received), ash of 7.3% and total
moisture of 16.6%.
The development timetable was assessed at approximately
8 months from receipt of development approvals to
production with fi rst shipment of product 2 months after
completion of construction.
The study results indicated the project is relatively simple
technically and delivers robust fi nancial returns with an
estimated capital cost of approximately US$20 million and
operating costs estimated at US$40 – 45 per tonne based on
a production rate of 3 Mtpa.
Project Approvals
The Project’s Environmental
Impact Analysis (Analisis
Mengenai Dampak Lingkungan or AMDAL) was approved by
the Regent of Berau in January 2010.
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REVIEW OF OPERATIONS
Paulsens East Iron Ore Project – Western
Australia6
Background
tenements are
located
The Paulsens East Project
approximately 140 kilometres west of Tom Price (close
to transport infrastructure) and eight kilometres east-
northeast of the Paulsens Gold mine in the northwest of
Western Australia.
Under a farm-out agreement between Strike and Process
Minerals International Pty Ltd (PMI) - a subsidiary of ASX-
listed Mineral Resources Limited - PMI had exclusive rights
to explore for and mine iron ore from Paulsens East. Strike
retained the rights to other minerals. Strike was entitled to a
royalty of A$ 3.20 per tonne, subject to variations in line with
movements in an iron ore benchmark price.
In the September Quarter 2010 PMI completed fi eld validation
of Strike’s previous drilling.
PMI carried out an initial internal analysis of potential mine
plans, mine cost models and export options for the iron
ore with a view to determining the optimum confi guration
for the project but did not undertake a planned drilling
program aimed at expanding the existing resources. On
23 July PMI informally advised Strike that it intends to
terminate the agreement and the transfer of technical data
has commenced. The Company is assessing its options in
relation to this project.
SUSTAINIBILITY
Perú – Social Climate
The social climate in Perú remains unsettled, with several
high-profi le disputes between resources companies and
local communities having occurred during the year. The
reasons for the protests are varied. In a number of cases
the protest leaders have strong political aspirations and
are primarily seeking to gain media attention. This makes
understanding and addressing the core issues challenging
and settling the disputes in a timely way very diffi cult.
6 Strike’s rights in this project consist of 100% of the rights to mine the coal
concession, subject to payment of a royalty to the concession owner.
Paulsens Iron Ore ridge
The central government has imposed martial law in two
cases in an attempt to halt violent protests and encourage
the parties to undertake genuine dialogue to resolve
outstanding matters. To date this approach has had some
success but is only initiated for serious disputes on major
projects.
It appears there is a general trend of increasing demands
from communities on resources companies and, in some
cases, rejection of existing formal and informal agreements.
There continue to be many success stories in Perú where
communities and resource companies work together
successfully for the benefi t of all stakeholders. These cases
are invariably underwritten by relationships built over
time based on mutual trust and respect. The situation is
being closely monitored by AF and Strike and appropriate
responses taken as required.
Community Approvals – Positive &
Improving
• Patience and trust building required, especially following
AF’s previous scale-down in response to the GFC and
partner dispute in 2008
• Colcabamba “pilot” successful along with innovative
Camposol visits and expertise
• Established “AF Information Offi ces” in 2 main
communities – Andahuaylas and Huininquiri
• President Humala’s visit and positive mining industry
messages to Andahuaylas and Apurima region
•
Formal dialogue underway with key communities
REVIEW OF OPERATIONS
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•
Some communities pro-actively approaching AF
• Requests from regional authorities to work with AF on
regional information processes for communities
• Community approvals fl owing and expected
to
accelerate over 2012/13
• Environmental approvals in line with programs
Cusco Approval
AF has an agreement with the community of Huinquiri at
the Santo Tomas project and a number of agreed programs
have been implemented. These include training workshops
and trail opening programs proposed by the community
and conducted for the benefi t of the community members.
Approximately 35 community members are currently
employed in these activities, which are fully funded by AF.
Relations with the community remain positive. Several
adjacent communities currently opposed to mining have
established a committee to monitor the AF programs. AF
welcomes this engagement and is pleased to be able to
demonstrate the value of its cooperative programs with
the community and its responsible approach to community
relations.
AF has completed the environmental work required to
obtain an environmental approval (EIS) that will allow for
drilling and other work at the Santo Tomas concessions. The
offi cial MINEM consultation process was undertaken with the
community on 17 July. Accordingly, the EIS will now be fi led
before the MINEM for approval during the December quarter.
All exploratory and/or geological works are being conducted
according to plan and the formal drilling approvals are expected
to be received from the relevant authorities during the fi rst
quarter of 2013, with drilling beginning in the June quarter.
Apurimac - Huinchos (Opaban 1) and
Colcabamba
During the quarter AF undertook several engagement
programs with the community of Huinchos, which
is
comprised of 4 main annexes or campesino communities.
Activities included:
•
•
discussions with community
regarding
community aspirations and the establishment of
information offi ces by AF to provide ready access to
community members to AF and its programs;
leaders
AF-sponsored trips for community members and
leadership to the world-class agricultural operationsof
Camposol, to view large-scale farming techniques, high-
quality food preparation installations, water treatment
and other
infrastructure necessary for sustained
commercial farming projects;
• Negotiating and agreeing access terms for exploration
with the Antapata campesino community. However, in
July when the AF team attempted to commence the
establishment of its information offi ces they were
confronted by a large group protesting their presence
and demanding that they
leave the community
immediately.
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REVIEW OF OPERATIONS
The AF community relations team has been largely replaced,
and has been placed under the fresh leadership of experienced
Social Responsibility Manager, Luis Romero. Subsequently the
new AF team has made signifi cant progress in re-establishing
constructive relationships and dialogue with the community
of Huinchos based on openness, honesty and delivery
of commitments. Key achievements to date
include the
recommencement of information sessions (internships) for
community members on the benefi ts of economic development
opportunities including mining, visits and information sessions to
the Camposol agri-business, commencement of construction of
a previously committed football fi eld, investigating joint AF and
community business opportunities and open dialogue on a range
of issues and approvals.
AF intends to build on this positive start and work with
the community leadership and broader population, as well
as the authorities, with a view to gaining formal access
during 2013. Respected social consulting group ProDialogo
is working with AF to establish a plan to gain access, with
the aim being to achieve this objective during the fi rst half
of 2013.
As noted above, all exploration and community programs have
ceased at Colcabamba following demands for cash payments,
beyond those already agreed, from the new community
leadership. At this stage it is diffi cult to envisage when
activities will recommence, although AF remains prepared to
honour its obligations under the existing agreement should
the community do the same.
Given that this prospect is not currently a priority, AF will wait
until the community leadership indicates that it is prepared
to honour the existing agreement before considering the
recommencement of direct engagement or community
programs.
Evaluation and Pre-Feasibility Studies
The initial Pre-feasibility Study (PFS) completed in 2008
focused upon the development of a 27 million tonne per
annum (27 Mtpa) mining operation producing 20 Mtpa of
high quality iron ore concentrate transported to the coast
for shipment via a slurry pipeline.
Example rope conveyor, Papua New Guinea
The PFS has confi rmed that the Apurimac Iron Ore Project
has the potential to become a highly profi table world class
iron ore operation, with:
• Average operating costs (OPEX) of approximately
US$14.50 per tonne
•
Total capital cost (CAPEX) of approximately US$2.3
billion
• High quality product grading +68% Fe, very low in
alumina, phosphorous and other impurities
Operating cash surplus of approximately US$1.44 billion
forecast for fi rst full year of production (based on iron ore
concentrate prices of approximately US$94 per tonne FOB).
The PFS included a series of studies project managed by
Sinclair Knight Merz (SKM).
Since that time AF has undertaken a number of optimisation
studies including further metallurgical test work, transport
option analysis (including a rope conveyor option), water
management studies and alternate production rate options;
all been covered in detail in previous reports. The extensive
body of study work has confi rmed the concentrate and
slurry pipeline confi gurations are the lowest technical risk
option. Under this option production rates of 15 – 20 Mtpa
are required over 15 to 20 years of operating life to provide
robust fi nancial returns.
Current resources at Opaban are suffi cient to supply at least
10 years of ore supply at the above rate. The focus for AF
remains the securing of access to Opaban and the Apurimac
satellite concessions to complete exploration and resource
defi nition programs to increase its iron ore to at least 500
Mt at similar grades to the Opaban prospect.
REVIEW OF OPERATIONS
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JORC RESOURCE STATEMENT
Apurimac Iron Ore Project - Apurimac Ferrum SA
Strike holds its interest in this project through its 50% holding in Perúvian joint venture company Apurimac Ferrum SA (AF). AF owns
the project’s mineral concessions. The other joint venture partner, D&C Group (D&C), holds 50% of AF. Strike provided loan funding to
AF of US$27 million until mid-2012 under a loan agreement. D&C previously had the right to match this funding to move to 50% of AF
or dilute to approximately 25% in mid-2012.
The Apurimac project has a JORC resource of 269.4 Mt, consisting of:
• a 142.2 Mt Indicated Mineral Resource at 57.8% Fe; and
• a 127.2 Mt Inferred Mineral Resource at 56.7% Fe.
Table 5 - Combined Mineral Resources for Opaban 1 and Opaban 3
Category
Project
Inferred
Indicated
Opaban 1
Indicated
Opaban 3
Totals
Density
t/m3
4
4
4
Mt1
Fe%
SiO2%
Al2O3%
P%
127.19
133.71
8.53
269.4
56.7
57.57
62.08
57.3
9.66
9.46
4.58
9.4
2.7
2.54
1.37
2.56
0.04
0.04
0.07
0.04
S%
0.2
0.12
0.25
0.16
1 Opaban 1 (40% Fe cut-off), 2 Opaban 3 (within 55% Fe envelope)
Full details of the basis for the Resource estimation are contained in Strike’s 11 February 2010 ASX Announcement: Apurimac Project
Resource Upgrade.
Cusco Iron Ore Project - Apurimac Ferrum SA
The Cusco Iron Ore Project currently comprises approximately 22 concessions totalling approximately 18,000 hectares located 130 to
180 kilometres south-east of the Apurimac Project area and 80 kilometres south of the historical city of Cusco.
Table 6 – Resources for Cusco Santo Tomas Project
Category
Project
Density
t/m3
Inferred
Santo Tomas
4
Totals
Mt*
104.4
104.4
Fe%
32.62
32.62
SiO2%
Al2O3%
P%
0.53
0.53
3.19
3.19
0.035
0.035
S%
0.53
0.53
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REVIEW OF OPERATIONS
Cusco, Cerro Ccopane Project - Cuervo Resources Inc.
Cerro Ccopane lies within 10 kilometres of Apurimac Ferrum’s Cusco Iron Ore project which is an asset owned by Cuervo Resources Inc
(Cuervo) of which Strike has fi nanced a C$5.75m loan facility which is convertible at C$0.30c per share (approximately 32.5% equity
in Cuervo).
Table 7 – Resources for Cerro Ccopane Project
Classifi cation
Tonnes (Mt)
Head Fe (%)
Cut-off Fe (%)
Prospect
Orcopura
Measured
Indicated
(Measured plus Indicated)
Orcopura
Inferred
19.7
35.9
55.6
51
48.26
45.91
46.75
43.7
20
20
20
20
OR
Prospect
Orcopura
Huillque and Aurora
Total
Classifi cation
Tonnes (Mt)
Head Fe (%)
Cut-off Fe (%)
Inferred*
Inferred
Inferred
46
72
118
45.8
52.6
50.4
30
30
30
*
Showing the inferred resource at Orcopura (previously modelled using a 20 % lower cut) now using a 30% lower cut, to enable a comparison between that resource and the inferred
resource now defi ned at Huillque and the Aurora prospects.
Competent Person Statement
The information in this document that relates to exploration results and mineral resources has been compiled by Mr Ken Hellsten,
B.Sc. (Geology), who is an employee of Strike Resources Ltd and is a Fellow of the Australasian Institute of Mining and Metallurgy.
Mr Hellsten has suffi cient experience relevant to the style of mineralisation and type of deposit under consideration and to the
activity which he is undertaking to qualify as a Competent Person as defi ned in the 2004 Edition of the “Australasian Code for
Reporting of Mineral Resources and Ore Reserves” (the JORC Code). Mr Hellsten consents to the inclusion in this document of the
matters based on this information in the form and context in which it appears.
Apurimac, Opaban 1
DIRECTORS’ REPORT
Your Directors present their report on the Consolidated
Entity consisting of Strike Resources Limited (“Company”
or “Strike”) and the entities it controlled at the end of, or
during, the year ended 30 June 2012.
Directors
The following persons were Directors of Strike during the
whole of the fi nancial year and up to the date of this report:
Malcolm Richmond
Ken Hellsten
Matthew Hammond
William Johnson
Samantha Tough was appointed as a Director on 23 January
2012 and continues in offi ce at the date of this report.
Principal Activities
The principal activities of the Consolidated Entity during
the fi nancial year consisted of the ongoing exploration
and evaluation of the Consolidated Entity’s interest in the
Apurimac and Cusco Iron Ore Projects located in Perú, South
America.
In addition, the Consolidated Entity is also involved in the
resale of land and its rights in the Berau Thermal Coal
Project in Indonesia.
Dividends
No dividends have been paid or declared during the
fi nancial year. At the date of this report, no dividend has
been recommended for payment in respect of the reporting
period.
26
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Review of Operations
Strike Resources is an Australian-listed resources company
with two principal projects in the attractive bulk commodities
market.
The Apurimac and Cusco Iron Ore Projects are large-scale
iron ore projects in southern Perú, with Apurimac the most
advanced with a high quality Concept-level Study completed
in 2008. The Company is seeking to establish an iron ore
mining operation based on its Opaban concessions located
at Apurimac.
The Company has strengthened its resource and exploration
position in Perú through the acquisition of an additional
6% of Apurimac Ferrum S.A. (AF) - taking Strike to 50% of
AF - and entering into a strategic option to acquire a major
stake in Cuervo Resources Inc. (Cuervo) which holds high-
quality exploration concessions in the Cusco district of
southern Perú, and which are complimentary to Strike’s own
concession interests in the same area.
Strike holds 100% of the rights to mine coal at the Berau
Thermal Coal Project in Indonesia, subject to a royalty to the
concession owner, through a Co-operation Agreement. The
Company is in dispute with the owner over the terms of the
agreement and currently negotiating a settlement.
A detailed discussion and analysis of Strike’s operations will
be set out in the annual report.
27
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A
DIRECTORS’ REPORT
Significant Changes in the State of Affairs
During the year the Consolidated Entity continued to
implement changes which were the result of a strategic
review of the Company’s operations.
On 1 July 2011 the Company announced that it had entered
into an agreement dated 30 June 2011 with Iron Associates
Corporation (“IAC”) to purchase IAC’s 12% shareholding in
Apurimac Ferrum S.A. (“AF”). Key terms of the agreement are
as follows:
• Strike acquired IAC’s 12% shareholding in AF.
•
•
IAC assigned to Strike a loan of US$ 5.462 million owed
by AF to IAC. This loan is convertible to AF shares in
July 2012 under the terms of the Settlement Agreement
between the AF shareholders.
IAC held a right, in certain circumstances, to convert its
AF shareholding to a royalty from AF’s future production.
This royalty right was extinguished as a result of the IAC
share purchase transaction.
• Strike paid IAC US$1.2m in cash on the execution of the
agreement and has issued IAC 9 million Strike shares
as consideration under the agreement. These shares
represent 6.3% of Strike’s issued capital.
On 19 July 2011 the Company announced that it had entered
into an agreement with Canadian explorer, Cuervo Resources
Inc. (“Cuervo”), to potentially earn up to 49.2% in Cuervo in
return for Strike loaning Cuervo up to 15m Canadian dollars
(“C$”). These funds are to be used by Cuervo to undertake
advanced exploration activities on their Perúvian iron ore
concessions. The program of work to be undertaken has
been agreed by both parties. Cuervo is a junior iron ore
explorer with concessions in Perú that are complementary
to AF’s concessions in the Cusco region in southern Perú.
Cuervo’s main project area, Cerro Ccopane, is 65km south
of the city of Cusco and hosts four (4) zones of magnetite
mineralisation being the Aurora, Orcopura, Huillque and Bob
1 prospects.
The first tranche of loan funds C$5.25m has been provided
to Cuervo and drilling commenced in May 2012. The second
tranche of C$9.75m is expected to be called on or about
November 2012. Strike has the option whether to provide the
second tranche funding.
Town of Colcabamba
On 13 October 2011 the Company announced that D&C had
exercised an option to acquire 6% of AF shares and US$2.73m of
debt which had been previously acquired by Strike in June 2011.
The option was part of the IAC transaction (where Strike acquired
12% AF shares plus US$5.462m debt from IAC).
On 9 December 2011 the Company announced that it had
substantially reduced AF’s work programmes due to a failure
to negotiate a financing agreement with D&C Group. At this
time and based on budgeted expenditure, it was expected
that the current AF loan facility would reach its US$20m
limit by about March 2012.
The Company announced on 21 December 2011 that a court
action by Millenium Trading against AF (Strike’s Perúvian joint
venture company) has been dismissed. Millenium sought to
invalidate an agreement under which it relinquished options
over certain mining concessions which were purchased by AF.
On 14 February 2012 the Company announced an increase
in iron ore inferred resources at the Cerro Ccopane Project,
Perú (with Strike’s interest held via its investment in Cuervo
Resources Inc.) of 72 million tonnes at 52.6%. The Cerro
Ccopane Project lies with 10km of the Cusco Iron Ore Project
owned Apurimac Ferrum SA, a joint venture between Strike
and D&C Group.
On 18 May 2012 the Company announced that it had issued
a “shootout notice” to its Perúvian partner D&C Group in
the AF joint venture pursuant to the Settlement Agreement
signed in July 2009. The shootout process provides the
Company with a unique opportunity to either move to 100%
ownership in AF or to sell its shares and receive repayment
of its loans to AF of approximately US$33m (as at May 2012).
DIRECTORS’ REPORT
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Cusco, Perú
Hole BDH 12-04 was drilled vertically 100 metres south of
BDH-02 and 03 intersected 188.9m of iron mineralisation
from 66.1m to 255.0m) at an average grade of 32.6% Fe,
with 28.5% SiO2,1.8% S, 0.08% P, 0.23% Mn and 0.06% Cu
including 22.50m of 55.9% Fe and 47.35m of 42.5% Fe.
Seven drill holes have been completed to date and results
of samples for two of those holes are awaited from the
laboratory and will be released once available.
On 6 September 2012 the Company announced that AF
had restructured the organisation in line with current
programmes and as a precursor to the result of the shootout.
The shootout will result in one shareholder owning 100%
of AF therefore enabling AF to be consolidated. The cost
savings from the restructure are estimated at approximately
US$250k per month from the December quarter onwards.
There have been no further changes of signifi cance since
then.
Matters Subsequent to the End of the Financial
Year
The Company announced on 31 July 2012 that Cuervo had
commenced drilling at the Bob 1 prospect at its Cerro
Ccopane Project.
On 23 July PMI informally advised Strike that it intends to
terminate the agreement, although it has not yet given a
formal notice. The Company is assessing its options in
relation to this project.
On 15 August the Company announced the results of
the initial drill hole completed by Cuervo Resources Inc.
(Cuervo) on the “Bob 1” target zone of its Cerro Ccopane
iron ore project in southern Perú. The initial drill hole (No.
2, drilled vertically) intersected 182.15 metres (m) of iron
mineralisation (from 12.35m to 194.5m) at an average grade
of 39.6% iron (Fe) with 23.2% Silica (SiO2), 2.3% Sulphur (S),
0.08% Phosphorous (P), 0.16% Manganese (Mn) and 0.10%
Copper (Cu).
On 31 August 2012 Strike announced the results of the next
two holes completed by Cuervo Resources Inc. (Cuervo)
on the “Bob 1” target zone of its Cerro Ccopane iron ore
project in southern Perú. Hole BDH-03, drilled adjacent to
the initial hole BDH12-02 but angled at 60° to the south east
intersected 156.0 metres (m) of iron mineralisation (from
19.2m to 175.2m) at an average grade of 40.9% Iron (Fe),
23.3% Silica (SiO2), 2.92% Sulphur (S), 0.06% Phosphorous
(P), 0.19% Manganese (Mn) and 0.12% Copper (Cu) with
higher grade zones of 43.35m of 50.4% Fe and 24.00m of
49.0% Fe.
29
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A
DIRECTORS’ REPORT
Likely Developments and Expected Results
of Operations
By the end of the year Strike had given D&C Group a notice
triggering the “shootout” process under the Settlement
Agreement. On or about 6 August 2012, the Company gave
notice to D&C Group of its shootout price, which gave an
implied value of US$37m. By 6 October 2012 D&C Group must
either provide a superior offer to Strike or accept the offer
Strike has made. As a result one party will acquire the other
party’s AF shares and pay out the debt that AF owns it within
30 days and this will move to 100% of AF. Strike believes it
has made a superior offer, and that it is unlikely D&C Group
will beat it.
The Company has been in negotiations with its Indonesian
partner to settle a long standing dispute. The current status
of negotiations is a proposed settlement, where Strike will
sell the land, data, reports and rights in relation to the Berau
Thermal Coal Project. At the time of writing no documents
had been executed, however, Strike was hopeful that this
transaction would complete in the short term.
Environmental Regulation
The Consolidated Entity notes the reporting requirements of
both the Energy Efficiency Opportunities Act 2006 (“EEOA”)
and the National Greenhouse and Energy Reporting Act 2007
(“NGERA”).
The Energy Efficiency Opportunities Act 2006 requires an
affected company to assess its energy usage, including the
identification, investigation and evaluation of energy saving
opportunities, and to report publicly on the assessments
undertaken, including what action the company intends to
take as a result.
The Consolidated Entity has determined that it does not
operate a recognised facility requiring registration and
reporting under the NGERA and, in any event it would fall
under the threshold of greenhouse gas emissions required for
registration and reporting. Similarly, the Consolidated Entity’s
energy consumption would fall under the threshold required
for registration and reporting under the EEOA.
The Consolidated Entity is not otherwise subject to any
particular or significant environmental regulation under
either Commonwealth or State legislation. To the extent that
any environmental regulations may have an incidental impact
on the Consolidated Entity’s operations, the Directors are
not aware of any breach by the Consolidated Entity of those
regulations.
DIRECTORS’ REPORT
Information on Directors
Malcolm Richmond
Chairman
Appointed
13 July 2011
Previous positions held Acting Chairman (3 February 2011 to 13 July 2011)
Non-Executive director (25 October 2006 to 3 February 2011)
Qualifi cations
BSc Hons (Metallurgy) and B. Comm. Merit (Econs)
(New South Wales)
Experience
Mr Richmond has 30 years’ experience with the Rio Tinto and CRA Groups in a number of positions including: Vice President,
Strategy and Acquisitions; Managing Director, Research and Technology; Managing Director, Development (Hamersley Iron Pty
Limited) and Director of Hismelt Corporation Pty Ltd. He was formerly Deputy Chairman of the Australian Mineral Industries
Research Association and Vice President of the WA Chamber of Minerals and Energy. Mr Richmond has also served as a Member on
the Boards of a number of public and governmental bodies and other public listed companies.
He is a qualifi ed metallurgist and economist with extensive senior executive and board experience in the resource and technology
industries both in Australia and internationally. His special interests include corporate strategy and the development of markets
for internationally traded minerals and metals - particularly in Asia.
Mr Richmond is a nominee director on the board of Cuervo Resources Inc. for Strike Resources Limited. Mr Richmond served as
Visiting Professor at the Graduate School of Management and School of Engineering, University of Western Australia until January
2012, and is a Fellow of the Australian Academy of Technological Sciences & Engineering, a Fellow of Australian Institute of Mining
and Metallurgy and a Member of Strategic Planning Institute (US).
Special responsibilities
Chairman of the Remuneration and Nomination Committee and member of the Audit Committee
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A
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N
N
A
Interests in shares and options
100,000 Shares (indirect) and 600,000 Unlisted Directors’ Options
Other current directorships in listed entities
Non-Executive Director:
Advanced Braking Technology Ltd (appointed August 2006)
Cuervo Resources Inc (appointed July 2011)
Argonaut Resources Ltd (appointed March 2012)
Water Resources Group Ltd (appointed July 2012)
Former directorships in other listed entities in past 3 years
Structural Monitoring Systems Plc (October 2006 to November 2010)
DIRECTORS’ REPORT
31
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0
2
T
R
O
P
E
R
L
A
U
N
N
A
Ken Hellsten
Managing Director
Appointed
Qualifications
24 March 2010
BSc Geology Hons (Monash University)
Experience
Mr Hellsten is a Geologist with over 30 years’ experience in the resources industry. He has been employed in senior executive
roles ranging from exploration to development and operations with both large multi-national and smaller resources companies,
including BHP Billiton, Centaur Mining, Ironclad Mining and Polaris Metals. During the past 20 years Mr Hellsten has lead teams
responsible for the definition and development of significant gold and nickel projects. Prior to his appointment to Strike, he served
as Managing Director of Polaris Metals NL, where he added significant value for shareholders by progressing that company’s iron-
ore assets towards development, and leading a strategic partner search, which ultimately resulted in the acquisition of Polaris by
Mineral Resources Limited in January 2010.
Mr Hellsten is a nominee director on the board of Cuervo Resources Inc. for Strike Resources Limited.
Mr Hellsten is a fellow of the Australasian Institute of Mining and Metallurgy and a member of the Australian Institute of Company
Directors. He has previously served on the Executive Councils of the Association of Mining and Exploration Companies and the
Northern Territory Chamber of Mines.
Special responsibilities
Executive Director
Interests in shares and options
217,083 Shares and 1,500,000 Unlisted Directors’ Options
Other current directorships in listed entities
Non-Executive Director of:
Heron Resources Ltd (appointed December 2006)
Brierty Limited (appointed February 2010)
Cuervo Resources Inc (appointed July 2011)
Former directorships in other listed entities in past 3 years
Polaris Metals NL (March 2009 to January 2010)
DIRECTORS’ REPORT
Matthew Hammond
Non-Executive Director
Appointed
Qualifi cations
25 September 2009
BA (Hons) (Bristol)
Experience
Mr Hammond is the Group Managing Director of Mail.Ru, one of the largest European internet businesses. Prior to that he was
Group Strategist at Metalloinvest Holdings, where he had responsibility for part of the non-core asset portfolio. Prior to joining
Metalloinvest, Mr Hammond was a director at Credit Suisse, where he worked for 12 years as an investment analyst. During his time
with Credit Suisse Mr Hammond was ranked number one 8 times in the Extell, Institutional Investor and Reuters surveys.
Special responsibilities
Member of the Audit and Remuneration and Nomination Committees
Interests in shares and options
Nil
Other current directorships in listed entities
Mail.Ru. (appointed April 2011)
Nautilus Minerals Inc (appointed October 2009)
Puricore Inc. (appointed May 2010)
Former directorships in other listed entities in past 3 years
Nil
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2
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P
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A
U
N
N
A
DIRECTORS’ REPORT
William Johnson
Non-Executive Director
Appointed
30 April 2010
Previous positions held
Executive Director (14 July 2006 to 30 April 2010)
Qualifications
MA (Oxon), MBA
Experience
Mr Johnson commenced his career in resource exploration and has held senior management and executive roles in a number
of public companies in Australia, New Zealand and Asia. Most recently, Mr Johnson has acted as an executive and non-executive
director of a number of ASX listed resource exploration and development companies and brings a considerable depth of experience
in business strategy, investment analysis, finance and execution.
Special responsibilities
Chairman of the Audit Committee and member of the Remuneration and Nomination Committee
33
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A
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N
N
A
Interests in shares and options
390,000 Unlisted Directors’ Options
Other current directorships in listed entities
Executive Director of:
Orion Equities Limited (appointed February 2003)
Bentley Capital Limited (appointed March 2009)
Non-Executive Director of:
Alara Resources Limited (appointed October 2009)
Former directorships in other listed entities in past 3 years
Nil
DIRECTORS’ REPORT
Samantha Tough
Non-Executive Director
Appointed
Qualifi cations
23 January 2012
LIB, BJuris Western Australia, GAICD
Experience
Ms Tough is a professional company director and chairman, with more than 14 years’ experience in public and private companies,
including four positions as Chairman. She has strong, proven strategic expertise, particularly in identifying and implementing
growth strategies for complex and substantial businesses and early-stage propositions.
Ms Tough has served at senior executive level or on the Board in a wide range of industries, including metals and mining in
particular iron ore, oil and gas, engineering services, infrastructure, energy and energy effi ciency, venture capital, e-commerce,
international telecommunications and law. Her previous executive roles include Senior Vice President, Strategic Counsel – Natural
Resources at the Commonwealth Bank, General Manager North West Shelf at Woodside Energy Ltd and Director Strategy Hardman
Resources Ltd. She also led the Pilbara Power Project on behalf of the Premier’s Department. Samantha’s involvement in these
industries has given her a sound understanding of conducting business internationally.
34
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2
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A
U
N
N
A
Special responsibilities
None
Interests in shares and options
Nil
Other current directorships in listed entities
Non-Executive Chairman of:
Southern Cross Goldfi elds Ltd (appointed July 2007)
Former directorships in other listed entities in past 3 years
Murchison Metals Ltd (May 2011 - Feb 2012)
Enerji Ltd (February 2010 - July 2010)
DIRECTORS’ REPORT
35
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Julian Tambyrajah
Chief Financial Officer
Appointed
Qualifications
2 April 2012
BCom, ASA, ACIS, FIPA
Experience
Mr Tambyrajah is a global mining executive, a qualified Accountant and Company Secretary with 21 years’ experience in the resources
(mining, oil & gas) and manufacturing industries, working in different environments such as operator, service contractor, explorer,
construction, joint ventures and alliances. Julian’s extensive experienced covers financial and techno-commercial areas such as
treasury, financing, accounting, supply and logistics, business development/acquisitions, investor relations, project evaluation,
feasibility studies, life of mine modelling and economics, construction and development, and operations management.
Mr Tambyrajah has held the position of Chief Financial Officer, Director and Company Secretary at several Australian mining and
petroleum companies, including Central Petroleum Limited, Crescent Gold Limited, Rusina Mining NL, DRDGold Limited, Dome
Resources NL and held management and accounting roles for Hills Industries, Brown & Root, Woodside and Normandy Mining.
Mr Tambyrajah has experience in raising equity and debt from national and international financial markets, some of which includes
raising A$122m whilst at Crescent Gold and A$31m whilst at Central Petroleum.
Special responsibilities
Chief Financial Officer
Interests in shares and options
1,000,000 Unlisted Employee Options
Other current directorships in listed entities
None
Former directorships in other listed entities in past 3 years
None
DIRECTORS’ REPORT
36
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Stephen Gethin
Company Secretary
The Company Secretary is Mr Stephen Gethin Barrister and Solicitor of the Supreme Court of Western
Australia, Grad Cert Tax (Curtin). Mr Gethin was appointed to the position of Company Secretary on
30 April 2010. Prior to joining Strike, Mr Gethin previously served as Company Secretary and General
Counsel for ERG Limited from 2006 to 2008. Mr Gethin worked in the Corporate and Finance practice
group in a national law fi rm from 2001 to 2004.
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the year ended 30 June 2012,
and the numbers of meetings attended by each director were:
Name
of Director
M Richmond
K Hellsten
W Johnson
M Hammond
S Tough
Board
Meetings
Committee Meetings
(Audit)
Committee Meetings
(Remuneration/
Nomination)
Attended
Meetings Held
Attended
Meetings Held
Attended
Meetings Held
11
12
12
10
5
12
12
12
12
5
2
1*
2
1
**
2
2*
2
2
**
1
**
-
1
**
1
**
1
1
**
*
**
Attended by invitation, not a member of the relevant committee
Not a member of the relevant committee
Retirement, Election and Continuance in Offi ce of Directors
Mr Hammond retired as Director by rotation under the Company’s Constitution at the November 2011 AGM and was re-elected at that
meeting.
DIRECTORS’ REPORT
Remuneration Report (Audited)
The Directors are pleased to present the Company’s 2012 remuneration report which sets out remuneration information for Strike
Resources Limited’s Non-Executive Directors, Executive Director and other key management personnel.
Directors and Key Management Personnel Disclosed in This Report
Name
Position
Non-executive and executive directors – see pages 30 - 36 above
37
Other key management personnel
2
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2
T
R
O
P
E
R
L
A
U
N
N
A
Julian Tambyrajah1
David Lim2
Ian Cullen3
Chief Financial Officer
Chief Financial Officer
General Manager Exploration and Development
1.
2.
3.
Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012
Mr Lim ceased from the position of Chief Financial Officer on 10 April 2012
Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
Role of Remuneration and Nomination Committee
is a
The Remuneration and Nomination Committee
committee of the Board. It is primarily responsible for making
recommendations to the Board on:
•
the necessary and desirable competencies of Directors
and the extent to which these are reflected in the Board
• suitable candidates for the position of Managing Director,
when required
•
•
the development and review of Board succession plans
the appointment and re-election of Directors
• making recommendations to the Board on policy governing
the benefits of the Managing Director and any other
Executive Director, including equity-based remuneration
• making recommendations to the Board on the specific
benefits to be provided to the Managing Director within
the policy
• conducting an annual review of Non-Executive Directors’
fees and determining whether the limit on the Non-
Executive Directors’ fee pool remains appropriate, and
• assisting the Managing Director to determine the
remuneration (including equity- based remuneration) of
Senior Management and advise on those determinations.
The purposes of the Remuneration and Nomination Committee
are:
• assist the Managing Director and the Board to adoptand
implement a remuneration system that is required to
attract, retain and motivate the personnel who will enable
the Company to achieve long-term success; and
•
identify appropriate candidates for membership of the
Board and, when necessary, identify suitable candidates
for the role of Managing Director.
In doing this, the Remuneration and Nomination Committee
seeks advice from independent remuneration consultants
and consults market and industry surveys (see page 42
below). Ultimate responsibility for the Company’s remuneration
and nomination policies and practices remains with the full
Board. The Corporate Governance Statement provides further
information on the role of this Committee. A copy of Strike’s
Remuneration and Nomination Committee Charter can be found
on the Company’s website at www.strikeresources.com.au.
DIRECTORS’ REPORT
With the exception of the above Special Exertion Policy,
Non-Executive Directors do not receive performance-based
pay. The Board had also previously resolved and issued Non-
Executive Directors with options at various exercise prices
and maturity dates as deemed appropriate at that time,
however, in line with Corporate Governance Principles and
Recommendations this is no longer the practice.
38
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1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Non-Executive Director Remuneration Policy
Fees and payments to Non-Executive Directors refl ect the
demands which are made on, and the responsibilities of, the
directors. The Remuneration and Nomination Committee
is responsible to review Non-Executive Directors’ fees
annually and makes recommendation to the Board. The
Board has also considered the advice of independent
market consultants to ensure Non-Executive Directors’ fees
and payments are appropriate and in line with the market.
The Chair’s fees are determined independently to the fees of
Non-Executive Directors’ based on comparative roles in the
external market.
Pursuant to the Company’s Constitution, each Director is
entitled to receive:
• Payment for the performance of extra services and
the undertaking of any executive or other work for the
Company beyond his or her general duties; and
• Payment for travelling and other expenses properly
incurred by a Director in attending meetings of the
Company or the Board or in connection with the Company’s
business.
Historically the Board had resolved to remunerate Non-
Executive Directors for work over and above that included
in their base Director’s fee under a Special Exertion Policy.
Where additional services are approved by the Board the
Non-Executive Director is entitled to receive $350 per hour
plus reimbursement of expenses.
DIRECTORS’ REPORT
Directors’ fees
Non-executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommended for
approval by shareholders. The maximum currently stands at $500,000 per annum and was approved by shareholders at the annual
general meeting on 25 November 2009.
The Chair’s remuneration was reviewed upon his appointment, in February 2011.
Each Non-Executive Director receives $45,000 per year, except for Ms Tough. Ms Tough receives a higher fee, being the market rate
that the Company determined was appropriate at the time she was appointed.
During the year the aggregate fees paid to Non-Executive Directors of the Company were as follows:
Director
Office held
M Richmond
Chairman
M Hammond1
Non-Executive Director
W Johnson
Non-Executive Director
S Tough2
Non-Executive Director
Gross Salary/fees and Superannuation for the Period
Fees
$
Special exertions
$
Superannuation
$
Total
$
70,000
45,000
45,000
40,000
33,250
-
41,300
-
9,293
-
7,767
3,600
112,543
45,000
94,067
43,600
1.
2.
The Director’s fee for Mr Hammond was reviewed in October 2010.
Ms Tough was appointed as a Non-Executive Director on 23 January 2012. Her Director’s fee was approved upon appointment.
Retirement Allowances for Non-Executive Directors
In line with the guidance from the ASX Corporate Governance Council on Non-Executive Directors’ remuneration, no Non-Executive
Directors receive retirement allowances. Superannuation contributions required under the Australian superannuation guarantee
legislation continue to be made and are deducted from the directors’ overall fee entitlements.
39
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Executive Remuneration Policy and Framework
In determining executive remuneration, the Board aims to ensure that remuneration practices are:
•
•
•
•
competitive and reasonable, enabling the Company to attract and retain key talent
aligned to the Company’s strategic and business objectives and the creation of shareholder value
transparent, and
acceptable to shareholders.
The executive remuneration framework has three components:
• base pay and benefits, including superannuation
•
•
short-term performance incentives, and
long-term incentives through participation in the Strike Resources Limited Employee Option Plan.
DIRECTORS’ REPORT
Executive Remuneration Mix
In accordance with the Company’s objective to ensure that executive remuneration is aligned to Company performance, a signifi cant
portion of the Managing Director’s target pay is “at risk”. The following chart sets out the Executives’ target remuneration mix:
Total Remuneration Mix
Other Executives
72%
28%
Managing Director
62%
18%
20%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Base pay and benefi ts
STI
LTI
Base Pay and Benefi ts
Executives receive their base pay and benefi ts structured as a total employment cost (TEC) package which may be delivered as a
combination of cash and prescribed non-fi nancial benefi ts at the executive’s discretion.
Executives are offered a competitive base pay that comprises the fi xed component of pay and rewards. Independent remuneration
consultants and/or reports provide analysis and advice to ensure base pay is set to refl ect the market for a comparable role. Base
pay for executives is also reviewed on promotion.
There are no guaranteed base pay increases included in the executives’ contracts.
Short-term Incentives
The Managing Director has the opportunity to earn an annual short-term incentive (STI) if predefi ned targets are achieved. The
targets are reviewed annually.
STI awards for the Managing Director and Other Executives in the 2012 calendar year were based on the scorecard measures and
weighting as disclosed below. These targets were set by the Remuneration Committee for the Managing Director and by the Managing
Director for Other Executives, which align management to the Company’s strategic and business objectives.
STI targets – Managing Director
Metrics
Weighting
To maintain develop and lead a lean, effective organisation in both Perú and Perth, capable of meeting the broad
objectives contained within the annual plan, yet accepting the reality of a volatile political environment
To successfully provide guidance to the Cuervo organisation in their own orebody development and to develop
the synergistic potential with Strike in an effective manner
To achieve a satisfactory resolution to the dispute on the Berau Thermal Coal Project assets
To achieve the best possible arrangements with regard to ownership and control of the AF Joint Venture
25%
25%
25%
25%
40
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1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
DIRECTORS’ REPORT
STI targets – Other Executives
41
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Metrics
Weighting
Safety/Security improvements on noncompliance and LTIs
Community approvals Opaban I & III and Satellite Concessions
Drilling at Bob 1, Opaban and selected Satellite sites
Satellite Concession Exploration
Budget or better achieved
Berau Thermal Coal Project dispute resolution
Perú Iron Ore Resource potential improved
Reporting superior quality and on time
Corporate: no material issues audit or corporate governance
10%
20%
15%
15%
10%
10%
10%
5%
5%
The Remuneration and Nomination Committee is responsible for assessing whether the KPIs are met. To assist in this assessment,
the Committee receives detailed reports on performance from management which are verified by industry surveys and, where
deemed appropriate, independent remuneration consultants. The Committee will make recommendations to the Board to adjust
short-term incentives downwards in light of unexpected or unintended circumstances.
Other senior executives currently do not have any short term incentives such as cash bonuses included in their employment
contracts. The executives’ performance is assessed on an annual basis and bonuses may be awarded on achievement of key
performance objectives by recommendation of the Managing Director and at the discretion of the Board.
Long-term Incentives
Long-term incentives are provided to certain employees via the Strike Resources Limited Employee Option Plan which was approved
by shareholders at the 6 November 2008 annual general meeting. The Employee Option Plan was subsequently amended on
8 November 2011.
The Strike Resources Limited Employee Option Plan is designed to provide long-term incentives for executives to deliver long-
term shareholder returns. Under the plan, participants are granted options which are vested on issue. The Board has discretion
to determine the exercise price and maturity date. Participation in the plan is at Board discretion and will often form part of an
employment contract.
In order to derive long-term shareholder returns, options granted in the financial year 2012 are exercisable from the grant date to
23 November 2016, in 3 equal tranches with exercise prices of 130%, 150%, and 200% of the one month volume-weighted average
price at the grant date.
DIRECTORS’ REPORT
Share Trading Policy
The Company’s Share Trading Policy regulates all Directors’ and, employees’ of Strike Resources Limited and its subsidiaries, and
certain contractors’, dealings in the Company’s securities. The Policy prohibits:
•
•
subscribing for, purchasing or selling Company securities or entering into an agreement to do any of those things; and
advising, procuring or encouraging another person (including a family member, friend, associate, colleague, family company or
family trust) to trade in Company securities,
whilst in possession of market-sensitive information, prior to disclosure of that information to the market and thereafter until
adequate time has elapsed for this to be refl ected in the security’s price, in accordance with the Corporations Act 2001. The Policy
also prohibits communicating inside information to any other person when directors, employees of Strike Resources Limited and its
subsidiaries, and certain contractors should reasonably know that they may deal in the Company’s securities or encourage another
person to do so.
In order to further reduce the risk of inappropriate securities dealing, directors, employees of Strike Resources Limited and its subsidiaries,
and certain contractors, must not deal in Company securities without the written consent of the “Trading Offi cers” nominated in the
Company’s Share Trading Policy. Consent will not be given during certain “Prohibited Periods” before key reporting dates or while inside
information exists. Directors, employees of Strike Resources Limited and its subsidiaries, and certain contractors must inform the Company
Secretary of all transactions they enter into involving the Company’s securities to enable disclosure to the market, where required.
A copy of Strike’s Share Trading Policy can be found on the Company’s website at www.strikeresources.com.au.
Use of Remuneration Consultant
During the year, the Company entered an agreement with PJ Kinder Consulting Pty Ltd (“Kinder”) for the provision of remuneration
recommendations in relation to the review of the Managing Director’s benefi ts. Under the term of the engagement, Kinder provided
remuneration recommendations as defi ned in section 9B of the Corporations Act 2001 and was paid $500 for this service.
Kinder confi rms that the above recommendations have been made free of undue infl uence by members of the group’s key management
personnel.
The following arrangements were made to ensure that the remuneration recommendations were free from undue infl uence:
• Kinder was engaged by, and reported directly to, the chair of the Remuneration and Nomination Committee. The agreement for
the provision of remuneration consulting services was executed by the Chair of the Remuneration and Nomination Committee
under delegated authority on behalf of the Board; and
•
The report containing the remuneration recommendations was provided by Kinder directly to the Chair of the Remuneration and
Nomination Committee; and
• PJ Kinder Consulting was not permitted to provide any member of management with a copy of its draft or fi nal report that
contained the remuneration recommendations.
As a consequence, the Board is satisfi ed that the recommendations were made free from undue infl uence from any members of the
key management personnel.
Remuneration reviews and recommendations for executives and employees are generally based on salary surveys from Godfrey
Remuneration Group Pty Ltd as recommended by the Managing Director and the Remuneration and Nomination Committee and at
the discretion of the Board.
42
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
DIRECTORS’ REPORT
43
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Voting and Comments Made at the Company’s 2011 Annual General Meeting
Strike Resources Limited received more than 94% of “yes” votes on its remuneration report for the 2011 financial year. The Company
did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.
Detail of Remuneration
The following tables show details of the remuneration received by the Directors and the key management personnel of the
Consolidated Entity for the current and previous financial year.
Short-term employee benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash
salary and
fees
Cash
bonus
Non-
monetary
benefit
Other
Super-
annuation
Long-
service
leave
Options
Total
$
$
$
$
$
$
$
$
2012
Non-Executive
Directors:
M Richmond
M Hammond
W Johnson
S Tough1
Executive Director:
K Hellsten
Other key
management
personnel:
J Tambyrajah2
D Lim3
I Cullen4
Total
103,250
45,000
86,300
40,000
-
-
-
-
-
-
-
-
325,000
75,000
8,400
52,500
173,687
217,752
-
15,000
9,668
1,832
2,100
53,761
-
-
-
-
-
-
7,258
21,784
9,293
-
7,767
3,600
36,000
4,725
15,883
19,056
1,043,489
99,668
66,093
29,042
96,324
-
-
-
-
-
-
-
-
-
-
-
-
-
112,543
45,000
94,067
43,600
115,395
559,795
83,742
76,930
57,697
142,799
290,858
379,718
333,764
1,668,380
1.
Ms Tough was appointed as Non-Executive Director on 23 January 2012.
2. Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012.
3. Mr Lim ceased from the position of Chief Financial Officer on 10 April 2012.
4. Mr Cullen was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
DIRECTORS’ REPORT
Short-term employee benefi ts
Cash
salary and
fees
Cash
bonus
Non-
monetary
benefi t
Post-
employment
benefi ts
Super-
Annuation
$
$
$
$
Long-term
benefi ts
Share-based
payments
Long-
service
leave
$
Options
Total
$
$
2011
Non-Executive
Directors:
M Richmond
M Hammond
M Horn7
W Johnson
F Khan5
S Madan6
F Moshiri7
Executive Director:
K Hellsten
Other key
management
personnel:
D Lim
M Lowry8
A Napier
Total
-
46,235
33,600
59,000
93,602
49,821
22,404
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,436
-
-
5,310
8,424
4,483
-
325,000
25,000
41,230
29,250
193,211
295,973
160,655
1,279,501
3,600
-
2,050
30,650
-
13,324
1,456
17,713
21,181
14,481
56,010
156,278
5. Mr Khan ceased being a director on 3 February 2011.
6. Mr Madan ceased being a director on 3 February 2011.
7. Mr Moshiri ceased being a director on 3 February 2011 (Mr Horn was Mr Moshiri’s alternate).
8. Mr Lowry ceased being an employee of the Company on 30 April 2011.
44
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,197
-
-
55,436
46,235
33,600
64,310
102,026
54,304
22,404
420,480
226,721
330,478
178,642
12,197
1,534,636
DIRECTORS’ REPORT
45
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Executive Director:
K Hellsten
Other key management personnel:
J Tambyrajah
D Lim
I Cullen
M Lowry
A Napier
Fixed remuneration
At risk - STI
At risk – LTI #
2012
2011
2012
2011
2012
2011
66%
93%
13%
42%
68%
82%
-
-
-
93%
-
100%
99%
-
5%
3%
-
-
7%
-
2%
-
-
1%
21%
58%
27%
15%
-
-
-
-
5%
-
-
-
#
Long-term incentives are provided exclusively by way of options, the percentages disclosed also reflect the value of remuneration consisting of options, based on the value of
options expensed during the year. Negative amounts indicate expenses reversed during the year due to a failure to satisfy the vesting conditions.
Service Agreements
Appointment to the Board as a Director is via resolution which outlines the Director’s agreed remuneration. The appointment is later
ratified by shareholders at the next general meeting. No formal service agreements are executed for Non-Executive Directors. On the
appointment to the Board, the Company enters into a deed with each Non-Executive Director to regulate certain matters between the
Company and that Non-Executive Director, however Matthew Hammond has not executed such a deed.
Remuneration and other terms of employment for the Managing Director, Chief Financial Officer and other key management personnel
are formalised in Employment Agreements. The Employment Agreement of the Managing Director provides for the provision of
performance-related cash bonuses, which are reviewed annually by the Remuneration and Nomination Committee. No specific cash
bonuses are provided in the Employment Agreements of other key management personnel.
Major provisions of the agreements relating to remuneration are set out below.
All agreements with Executives may be terminated early by either party with notice periods from 1-3 months, subject to termination
payments as detailed below:
Name
K Hellsten – Managing Director
J Tambyrajah – Chief Financial
Officer
Term of agreement
On-going commencing
1 March 2010
On-going commencing
2 April 2012
I Cullen - General Manager Exploration and
Development
On-going commencing
1 July 2011- terminated on 15 July 2012
D Lim – Chief Financial Officer
On-going commencing
9 December 2009 - terminated on 10 April 2012
Base salary including
superannuation
Termination
benefit
$354,250
$238,000
$227,000
$225,000
*
**
**
**
Six months’ gross base salary on termination other than for termination due to misconduct; breach of contract; removal as a director by shareholders.
*
** No specific termination benefits are payable on termination of the service agreement.
DIRECTORS’ REPORT
Share-based Compensation
The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows:
Grant date
Vesting and
exercise date
Expiry date
Exercise
price
Value per
option at grant
date
Performance
achieved
%
Vested
24 November 2011
24 November 2011
23 November 2016
24 November 2011
24 November 2011
23 November 2016
24 November 2011
24 November 2011
23 November 2016
5 April 2012
5 April 2012
5 April 2012
5 April 2012
23 November 2016
5 April 2012
23 November 2016
5 April 2012
23 November 2016
$0.36
$0.42
$0.56
$0.36
$0.42
$0.56
$0.085
$0.079
$0.067
$0.091
$0.085
$0.075
N/A
N/A
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
Options granted under the plan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share within 5 business days after the exercise.
Details of options over ordinary shares in the Company provided as remuneration to each director of Strike Resources Limited and each of
the key management personnel of the Company and the Consolidated Entity are set out below. When exercisable, each option is convertible
into one ordinary share of Strike Resources Limited. Further information on the options is set out in note 28 to the fi nancial statements.
Name
Number of options
granted during the
year
Value of options at
grant date*
Number of options
vested during the
year
Number of options
lapsed during the
year
Value at lapse
date**
Directors of Strike Resources Limited
M Richmond
M Hammond
W Johnson
S Tough
K Hellsten
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
$115,395
1,500,000
Other key management personnel of the Consolidated Entity
J Tambyrajah
I Cullen
D Lim
1,000,000
750,000
1,000,000
$83,742
$57,697
$76,930
1,000,000
750,000
1,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,600,000
$76,576
The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration.
*
** The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a vesting condition was not satisfi ed, or the participant
ceased to be employee of the Company. The value is determined at the time of lapsing, but assuming the condition was satisfi ed.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to
vesting date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined
using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution,
the share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free
interest rate for the term of the option.
46
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
DIRECTORS’ REPORT
Shares Provided on Exercise of Remuneration Options
There were no shares issued as a result of the exercise of Directors’ or employee options which were issued as part of remuneration
during the current year (2011: nil).
Details of Remuneration: Bonuses and Share-based Compensation Benefits
For each cash bonus and grant of options included in the tables on pages 43 - 46, the percentage of the available bonus or grant that
was paid, or that vested, in the financial year and the percentage that was forfeited because the person did not meet the service and
performance criteria is set out below. No part of the bonus is payable in future years. The options vest immediately and will lapse on
termination of employment, except due to redundancy or disability, in which case they will continue for 12 months or until any earlier
expiry date. The Board has discretion to vary the lapse dates of terminating employees’ options.
Bonus
Share-based compensation benefit (options)
Name
Paid
Forfeited
Year granted
Vested
Forfeited/Lapsed
Financial years in which
options may vest
M Richmond
M Hammond
W Johnson
S Tough
K Hellsten
J Tambyrajah
D Lim
I Cullen
-
-
-
-
-
-
-
-
75%
25%
*
*
*
*
*
*
-
-
-
-
2012
2012
2012
2011
2012
-
-
-
-
100%
100%
100%
100%
100%
-
-
-
-
-
-
100%***
100%**
-
-
-
-
-
2012
2012
2012
2011
2012
* Service agreement does not contain cash bonuses.
** Options were cancelled in 2012.
*** Options lapsed in 2012 due to the termination of employment.
47
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
DIRECTORS’ REPORT
Shares under Options
Unissued ordinary shares of Strike Resources Limited under option at the date of this report are as follows:
Date of options granted
Expiry date
Issue price of shares
Number under option
3 December 2007
5 March 2008
25 November 2009
25 November 2009
25 November 2009
24 November 2011*
24 November 2011*
24 November 2011*
5 April 2012*
5 April 2012*
5 April 2012*
2 December 2012
3 March 2013
24 November 2012
24 November 2012
24 November 2012
23 November 2016
23 November 2016
23 November 2016
23 November 2016
23 November 2016
23 November 2016
$3.978
$2.878
$2.50
$2.75
$3.25
$0.36
$0.42
$0.56
$0.36
$0.42
$0.56
3,500,000
250,000
750,000
750,000
750,000
1,083,334
1,083,333
1,083,333
333,334
333,333
333,333
*
Included in these options were options granted as remuneration to the directors and the fi ve most highly remunerated offi cers during the year. Details of options granted to key
management personnel are disclosed on page 43 – 46 above.
No option holder has any right under the options to participate in any other share issue of the Company.
This concludes the Audit Remuneration Report.
JORC Code Competent Person Statement
The information in this document which relates to Mineral Resources at the Apurimac, Cusco and Cerro Ccopane projects and to
exploration results has been prepared by Mr Ken Hellsten, who is an employee of Strike Resources Limited and is a Fellow of the
Australasian Institute of Mining and Metallurgy. Mr Hellsten has suffi cient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity which he is undertaking, to qualify as Competent Persons as defi ned in the
2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore Reserves” (the JORC Code). Mr Hellsten consents
to the inclusion in this document of the matters based on this information in the form and context in which it appears.
Insurance of Offi cer
The Directors have not included details of the nature of the liabilities covered or the amount of premiums paid in respect of a
Directors’ and Offi cers’ liability and legal expenses insurance contract, as such disclosure is prohibited under the terms of the
contract. The Company has executed Directors’ deeds with each Director (other than Matthew Hammond) to indemnify the directors
for liabilities or legal costs incurred as an offi cer and advance monies to meet costs in relation to the indemnities under the deed.
Proceedings on Behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Company with leave
of the Court under section 237 of the Corporations Act 2001.
48
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
DIRECTORS’ REPORT
Non-audit Services
49
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the Consolidated Entity are important.
Details of the amounts paid or payable to the auditor (BDO Audit (WA) Pty Ltd) and to other parties for work performed on behalf of
the auditor, for audit and non-audit services provided during the year are set out below.
The Board of Directors has considered the position and, in accordance with advice received from the Audit Committee, is satisfied
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartially and objectivity of
the auditor.
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
During the year the following fees were paid or payable for audit and non-audit services provided by the auditor of the Company, its
related practices and non-related audit firms:
Audit & Review Fees – BDO Audit (WA) Pty Ltd
Fees for non-audit services
Audit & Review Fees – Affiliated practices of BDO International
Total
Auditors’ Independence Declaration
Consolidated Entity
2012
$
2011
$
84,774
-
6,830
91,604
51,934
795
7,187
59,916
A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 58.
Auditor
BDO Audit (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001
This report is made in accordance with a resolution of directors.
Ken Hellsten
Managing Director
25 September 2012
CORPORATE GOVERNANCE STATEMENT
CORPORATE GOVERNANCE STATEMENT
Strike Resources Limited (“Company” or “Strike”) and the
Board are committed to achieving and demonstrating the
highest standards of corporate governance. The Board
continues to review the framework and practices to ensure
they meet the interests of shareholders. The Company
and its controlled entities together are referred to as the
Consolidated Entity in this statement.
A description of the Consolidated Entity’s main corporate
governance practices is set out below. All these practices
were in place for the entire year and they comply with the
ASX Corporate Governance Principles and Recommendations
unless otherwise stated.
The Board of Directors strongly supports the Corporate
Governance Principles and Recommendations. Strike’s
practices are consistent with the principles, subject to the
exception that there is not an independent majority on
the Board or on Board Committees. It is not considered
appropriate to move to an independent Board majority
immediately due to the scale of the Company’s activities,
however, the Board supports moving to that position as the
Company’s activities expand. An additional independent
director was appointed in January 2012 and the Board
continues to monitor the potential to further increase the
number of its independent members in the future.
Principle 1: Lay a Solid Foundations for Management and
Oversight
The relationship between the Board and senior management
is critical to the Consolidated Entity’s long term success.
The Directors are responsible to shareholders for the
performance of the Consolidated Entity in both the short
term and the longer term and seek to balance sometimes
competing objectives in the best interest of the Consolidated
Entity as a whole. Their focus is to enhance the interests of
shareholders and other key stakeholders and to ensure the
Consolidated Entity is properly managed.
The responsibilities of the Board include:
• providing strategic guidance to the Consolidated Entity
including contributing to the development of and
approving the corporate strategy
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•
reviewing and approving business plans, the annual
budget and fi nancial plans including available resources
and major capital expenditure initiatives
• overseeing and monitoring:
- organisational performance and the achievement
of the Consolidated Entity’s strategic goals and
objectives
-
-
-
compliance with the Company’s Code of Conduct
(see page 54)
progress in relation to the Company’s diversity
objectives and compliance with
its diversity
policy
progress of major capital expenditures and other
signifi cant corporate projects
including any
acquisitions and divestments
• monitoring fi nancial performance including approval of
the annual and half-year fi nancial reports and liaison
with the auditors
•
•
•
•
appointment, performance assessment and, if necessary,
removal of the Managing Director
the appointment and/or
ratifying
removal and
contributing to the performance assessment of the
senior management team including the Chief Financial
Offi cer and the Company Secretary
ensuring there are effective management processes in
place and approving major corporate initiatives
enhancing and protecting the reputation of the
organisation
• overseeing the operation of the Consolidated Entity’s
system for compliance and risk management reporting
to shareholders
•
ensuring appropriate resources are available to senior
management.
Day to day management of the Consolidated Entity’s affairs
and the implementation of the corporate strategy and
policy initiatives are formally delegated by the Board to the
Managing Director and Senior Executives as set out in the
Consolidated Entity’s delegations policy. These delegations
are reviewed on an annual basis.
A performance assessment for Senior Executives last took
place in December 2011. The process for these assessments
is described on the Company’s website.
CORPORATE GOVERNANCE STATEMENT
Principle 2: Structure the Board to Add Value
•
the size of the Board is conducive to effective discussion
and effi cient decision-making.
The Board operates in accordance with the broad principles
set out in its charter which is available from the corporate
governance information section of the Company’s website at
www.strikeresources.com.au. The charter details the Board’s
composition and responsibilities.
Board Composition
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The charter states:
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•
•
•
•
the Board is to be comprised of both Executive and Non-
Executive Directors with a majority of Non-Executive
Directors. Non-Executive Directors bring a
fresh
perspective to the Board’s consideration of strategic,
risk and performance matters
in recognition of the importance of independent views
and the Board’s role in supervising the activities of
management, the Chairman must be an independent
Non-Executive Director, the majority of the Board
should be independent of management and all Directors
are required to exercise independent judgement and
review and constructively challenge the performance of
management
the Chairman is elected by the full board and is required
to meet regularly with the Managing Director
the Company is to maintain a mix of Directors on the
board from different genders, age groups, ethnicity
and cultural and professional backgrounds who have
complementary skills and experience
the Board will periodically consider the appropriate
mix of skills required by the Board to maximise its
effectiveness and its contribution to the Consolidated
Entity.
The Board seeks to ensure that:
•
at any point in time, its membership represents an
appropriate balance between Directors with experience
and knowledge of the Consolidated Entity and Directors
with an external fresh perspective
• measurable board gender diversity objectives are
established, to assess the objectives and progress in
achieving them periodically
Directors’ Independence
The Board has adopted specifi c principles in relation to
Directors’ independence. These state that when determining
independence, a Director must be Non-Executive and the Board
should consider whether the Director:
•
•
is a substantial shareholder of the Company or an offi cer
of, or otherwise associated directly with, a substantial
shareholder of the Company
is or has been employed in an executive capacity by the
Company or any other Consolidated Entity member within
three years before commencing to serve on the Board
• within the last three years has been a principal of a
material professional adviser or a material consultant to
the Company or any other Consolidated Entity member,
or an employee of such adviser or consultant materially
associated with the service provided
•
•
•
is a material supplier or customer of the Company or any
other Consolidated Entity member, or an offi cer of or
otherwise associated directly or indirectly with a material
supplier or customer
has a material contractual relationship with the Company
or a controlled entity other than as a Director of the
Consolidated Entity
is free from any business or other relationship which
could, or could reasonably be perceived to, materially
interfere with the Director’s independent exercise of their
judgement.
is determined on both
Materiality for these purposes
quantitative and qualitative bases. An amount of over 5%
of annual turnover of the Company or Consolidated Entity
is considered material for these purposes. In addition, a
transaction of any amount or a relationship is deemed material
if knowledge of it may impact the shareholders’ understanding
of the Director’s performance.
Recent thinking on corporate governance has introduced
the view that a Director’s independence may be perceived to
be impacted by lengthy service on the Board. To avoid any
potential concerns, the Board has determined that a Director
will not be deemed independent if he or she has served on the
Board of the Company for more than ten years. The Board will
continue to monitor developments on this issue.
CORPORATE GOVERNANCE STATEMENT
The Board assesses independence each year. To enable this
process, the Directors must provide all information that may be
relevant to the assessment.
Board Members
Details of the members of the Board, their experience,
expertise, qualifi cations, term of offi ce, relationships
affecting their independence and their independent status
are set out in the directors’ report under the heading
‘Information on Directors’. At the date of signing the
Directors’ Report, there is one Executive Director and four
Non-Executive Directors, two of whom have no relationships
adversely affecting independence and so are deemed
independent under the principles set out above:
• William Johnson and Matthew Hammond are both
representative Directors for major shareholders and
have therefore been deemed ‘not independent’ as
Directors of the Company
•
No Director has served on the Board of the Company for
more than ten years.
Chair and Managing Director (MD)
The Chair is responsible for leading the Board, ensuring
Directors are properly briefed in all matters relevant to
their role and responsibilities, facilitating Board discussions
and managing the Board’s relationship with the Company’s
senior executives. In accepting the position, the Chair
has acknowledged that it will require a signifi cant time
commitment and has confi rmed that other positions will
not hinder his effective performance in the role of Chair.
The Chair of the Company is Malcolm Richmond, whose
qualifi cations and experience are stated in the Company’s
Directors Report.
The MD is responsible for implementing Consolidated Entity
strategies and policies. The board charter specifi es that the
roles of Chair and MD are separate roles to be undertaken by
separate people.
Induction
The
induction provided to new Directors and senior
managers enables them to actively participate in Board
and management decision-making, respectively, as soon as
possible. It ensures that they have a full understanding of the
Company’s fi nancial position, strategies, operations, culture,
values and risk management policies. It also explains the
respective rights, duties, responsibilities, interaction and
roles of the Board and Senior Executives and the Company’s
meeting arrangements.
Commitment
The Board held twelve board meetings and an additional
corporate strategy workshop during the year.
Non-Executive Directors are expected to spend the time
required to prepare for and attending Board and Committee
meetings and associated activities.
The number of meetings of the Company’s Board of Directors
and of each Board Committee held during the year ended 30
June 2012, and the number of meetings attended by each
Director is disclosed on page 36.
It is the Company’s practice to allow its Executive Directors to
accept appointments outside the Company with prior written
approval of the Board. No appointments of this nature were
accepted during the year ended 30 June 2012.
The commitments of Non-Executive Directors are considered
by the Nomination Committee prior to the Directors’
appointment to the Board of the Company and are reviewed
each year.
Prior to appointment or being submitted for re-election, each
Non-Executive Director is required to specifi cally acknowledge
that they have and will continue to have the time available to
discharge their responsibilities to the Company.
Confl ict of Interests
No Director had business dealings with the Consolidated
Entity during the year, other than provision of minor services
as described in note 22 to the fi nancial statements. In
accordance with the board charter, the Directors concerned
declared their interests in those dealings to the Company
and took no part in decisions relating to them or the
preceding discussions. In addition, those Directors did not
receive any papers from the Consolidated Entity pertaining
to those dealings.
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CORPORATE GOVERNANCE STATEMENT
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Independent Professional Advice
Subject to prior consultation with the Chair, each Director has
the right to seek independent legal and other professional
advice at the Company’s expense concerning any aspect of
the Company’s operations or undertakings in order to fulfi l
their Directors’ duties.
Performance Assessment
The Board’s has a policy to ensure that the Directors and
Executives of the Company are equipped with the knowledge
and information they need to discharge their responsibilities
effectively and that individual and collective performance is
regularly and fairly reviewed. Although the Company is not
of a size to warrant the development of formal processes for
evaluating the performance of its Board, individual Directors
and Executives, there is on-going monitoring by the Chair and
self-review by the Board. The Chair also speaks to Directors
individually regarding their role as a Director.
Board Committees
The Board has established a number of committees to assist in
the execution of its duties and to allow detailed consideration
of complex issues. Current committees of the Board are the
Remuneration and Nomination Committee and the Audit
Committee. Each committee is comprised entirely of Non-
Executive Directors.
Each Committee has its own written charter setting out its
role and responsibilities, composition, structure, membership
requirements and the manner in which the committee is to
operate. All of these charters are available on the Company’s
website. All matters determined by committees are submitted
to the full Board as recommendations for board decisions.
Minutes of committee meetings are tabled at the subsequent
board meeting. Additional requirements for specifi c reporting
by the Committees to the Board are addressed in the charter of
the individual committees.
Nomination Committee
The Nomination Committee function is performed by the
Remuneration and Nomination Committee (the Committee).
The Strike Board is not of suffi cient size to warrant separate
Remuneration and Nomination Committees.
The Committee consists of the following Non-Executive
Directors (a majority of whom are not independent):
Malcolm Richmond – Committee Chair (independent)
Matthew Hammond (not independent)
William Johnson (not independent)
Details of these Directors’ attendance at Committee meetings
are set out in the Directors’ Report on page 36.
The Committee operates in accordance with its charter which is
available on the Company’s website. The main responsibilities
of the Committee in relation to its nomination function are to
make recommendations to the Board as to:
•
•
•
•
•
the necessary and desirable competencies of Directors and
the extent to which these are refl ected in the Board
suitable candidates for the position of Managing Director,
when required
the development and review of Board succession plans
the appointment and re-election of Directors, and
any other function conferred upon it by the Board related
to Board membership and succession.
When a new Director is to be appointed, the Committee reviews
the range of skills, experience and expertise on the Board,
and to identify its needs. From this the Committee prepares a
short-list of candidates with appropriate skills and experience.
A number of channels are used to source candidates to ensure
the Company benefi ts from a diverse range of individuals in
the selection process. Where necess ary, advice is sought from
independent search consultants.
The full Board then appoints the most suitable candidate. A
Director appointed by the Board must stand for election at the
next annual general meeting of the Company. The Board and the
Committee are also aware of the advantages of Board renewal
and succession planning.
Details of the nomination, selection and appointment processes
are available on the Company’s website.
Notices of meetings for the election of Directors comply
with the ASX Corporate Governance Council’s best practice
recommendations.
All new Directors participate in a comprehensive, formal
induction program which covers the operation of the Board
and its Committees and fi nancial, strategic, operations and risk
management issues.
CORPORATE GOVERNANCE STATEMENT
Principle 3: Promote Ethical and Responsible Decision Making
Code of Conduct
The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and applies to all Directors
and employees. The code is periodically reviewed and will be updated as necessary to ensure it refl ects the highest standards of
behaviour and professionalism and the practices necessary to maintain confi dence in the Consolidated Entity’s integrity and to take
into account legal obligations and reasonable expectations of the Company’s stakeholders.
In summary, the Code requires that at all times all Company personnel act with the utmost integrity, objectivity and in compliance
with the letter and the spirit of the law and Company policies.
The Company has a trading policy which outlines the restrictions, closed periods and processes required when Directors, MD and key
management personnel trade Company securities. Broadly, it states that the purchase and sale of Company securities by Directors
and senior management is only permitted with written approval from the trading offi cer. Permission will not be given while inside
information exists and will not in any case be given during the following blackout periods before the following key events:
Event
Start of Period
Release of full-year results on ASX.
28 days before the proposed date for release.
Release of half-year results on ASX.
28 days before the proposed date for release.
Release of quarterly cash-fl ow report on ASX.
14 days before the proposed date for release.
Annual General Meeting (AGM).
14 days before the AGM.
Signifi cant exploration drilling campaign.
5 days before the proposed date for release of the drilling results on ASX.
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Diversity Policy
The Company values diversity and recognises the benefi ts it
can bring to the organisation’s ability to achieve its goals.
Accordingly the Company has developed a diversity policy,
a copy of which can be found on the Company’s website.
This policy outlines the Company’s diversity objectives in
relation to gender, age, cultural background and ethnicity. It
includes requirements for the Board to establish measurable
objectives for achieving diversity, and for the Board to assess
annually both the objectives, and the Company’s progress in
achieving them.
Due to the Company’s relatively small workforce, all staff is
subject to the same securities trading restriction as Directors
and senior management at the present time.
The Code and the Company’s trading policy are discussed with
each new employee as part of their induction training. Further
training is periodically provided and all employees are asked
to sign an annual declaration confi rming their compliance
with the Code and the trading policy.
The Code requires employees who are aware of unethical
practices within the Consolidated Entity or breaches of the
Company’s trading policy to report these using the Company’s
whistleblower policy. This can be done anonymously.
The Directors are satisfi ed that the Consolidated Entity has
complied with its policies on ethical standards, including
trading in securities.
A copy of the Code and the trading policy are available on the
Company’s website.
CORPORATE GOVERNANCE STATEMENT
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Principle 4: Safeguard Integrity in Financial
Reporting
Audit Committee
The Audit Committee consists of the following Non-Executive
Directors:
William Johnson – Committee Chair (not independent)
Matthew Hammond (not independent)
Malcolm Richmond (independent)
Details of these Directors’ qualifi cations and attendance at
Audit Committee meetings are set out in the Directors’ Report
on page 30 - 36.
All members of the Audit Committee are fi nancially literate and
have an appropriate understanding of the industries in which
the Consolidated Entity operates.
The Audit Committee operates in accordance with a charter
which is available on the Company’s website. The main
responsibilities of the committee are to:
•
•
•
•
•
•
review, assess and approve the annual full and concise
reports, the half-year fi nancial report and all other fi nancial
information published by the Company or released to the
market
assist the Board in reviewing the effectiveness of the
organisation’s internal control environment covering:
- effectiveness and effi ciency of operations
- reliability of fi nancial reporting
- compliance with applicable laws and regulations
oversee the effective operation of the risk management
framework
recommend to the Board the appointment, removal and
remuneration of the external auditors, and review the
terms of their engagement, the scope and quality of the
audit and assess performance
consider the independence and competence of the external
auditor on an ongoing basis
review and approve the level of non-audit services provided
by the external auditors and ensure it does not adversely
impact on auditor independence
•
•
review and monitor related party transactions and assess
their propriety
report to the Board on matters relevant to the committee’s
role and responsibilities.
In fulfi lling its responsibilities, the Audit Committee:
•
receives reports from management and the internal and
the external auditors
• meets with the external auditors at least twice a year, or
more frequently if necessary
•
•
reviews the processes the Managing Director and Chief
Financial Offi cer have in place to support their certifi cations
to the Board
reviews any signifi cant disagreements between the
auditors and management, irrespective of whether they
have been resolved
• meets separately with the external auditors at least twice a
year without the presence of management
•
provides the external auditors with a clear line of direct
communication at any time to either the Chair of the Audit
Committee or the Chair of the Board.
The Audit Committee has authority, within the scope of its
responsibilities, to seek any information it requires from any
employee or external party.
External Auditors
The Company and Audit Committee policy is to appoint external
auditors who clearly demonstrate quality and independence.
The performance of the external auditor is reviewed annually
and applications for tender of external audit services are
requested as deemed appropriate, taking into consideration
assessment of performance, existing value and tender costs.
BDO was appointed as the external auditor in 2008. It is BDO’s
policy to rotate audit engagement partners on listed companies
at least every fi ve years, and in accordance with that policy a
new audit engagement partner will be introduced for the year
ended 30 June 2013.
An analysis of fees paid to the external auditors, including a
break-down of fees for non-audit services, is provided in the
Directors’ Report and in note 19 to the Financial Statements.
It is the policy of the external auditors to provide an annual
declaration of their independence to the Audit Committee.
The external auditor will attend the Annual General Meeting
and be available to answer shareholder questions about the
conduct of the audit and the preparation and content of the
audit report.
CORPORATE GOVERNANCE STATEMENT
Principle 5 and 6: Make Timely and Balanced
Disclosures and Respect the Rights of
Shareholders
Where possible, the Company arranges for advance notifi cation
of signifi cant group briefi ngs (including, but not limited to,
results announcements) and makes them widely accessible.
Continuous Disclosure
Principle 7: Recognise and Manage Risk
The Company has written policies and procedures on
information disclosure that focus on continuous disclosure
of any information concerning the Consolidated Entity that
a reasonable person would expect to have a material effect
on the price of the Company’s securities. These policies and
procedures also include the arrangements the Company has
in place to promote communication with shareholders and
encourage effective participation at general meetings. A
summary of these policies and procedures is available on the
Company’s website.
The Company Secretary has been nominated as the person
responsible for communications with the Australian Securities
Exchange (ASX). This role includes responsibility for ensuring
compliance with the continuous disclosure requirements in the
ASX Listing Rules and overseeing and co-ordinating information
disclosure to the ASX, analysts, brokers, shareholders, the
media and the public.
All information disclosed to the ASX is posted on the Company’s
website as soon as it is disclosed to the ASX. When analysts are
briefed on aspects of the Consolidated Entity operations, the
material used in the presentation is released to the ASX and
posted on the Company’s website. Analysts do not receive
price-sensitive information at any time prior to disclosure to
the market as a whole. Procedures have also been established
for reviewing whether any price-sensitive information has
been inadvertently disclosed and, if so, the policy requires this
information to be immediately released to the market.
The website also enables users to provide feedback and has
an option for shareholders to register their email address for
direct email updates on Company matters.
All shareholders receive a copy of the Company’s annual (full
or concise) and half-yearly reports. In addition, the Company
seeks to provide opportunities for shareholders to participate
through electronic means. Recent initiatives to facilitate this
include making all Company announcements, media briefi ngs,
details of Company meetings, press releases for the last three
years and fi nancial reports for the last fi ve years available on
the Company’s website. In 2012, the Company will video record
the Chairman and Managing Director’s addresses to the Annual
General Meeting and make them available on the website.
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The Board is responsible for satisfying itself annually, or more
frequently as required, that management has developed and
implemented a sound system of risk management and internal
control. Detailed work on this task is delegated to the Audit
Committee and reviewed by the full Board.
The Audit Committee is responsible for ensuring there are
adequate policies in relation to risk management, compliance
and internal control systems. They monitor the Company’s
risk management by overseeing management’s actions in
the evaluation, management, monitoring and reporting of
material operational, fi nancial, compliance and strategic risks.
In providing this oversight, the committee:
•
•
•
•
reviews the framework and methodology for risk
identifi cation, the degree of risk the Company is willing
to accept, the management of risk and the processes for
auditing and evaluating the Company’s risk management
system
reviews group-wide objectives in the context of the
abovementioned categories of corporate risk
reviews and, where necessary, approves guidelines and
policies governing the identifi cation assessment and
management of the Company’s exposure to risk
reviews and approves the delegations of fi nancial
authorities and addresses any need to update these
authorities on an annual basis, and
•
reviews compliance with agreed policies.
The Committee recommends any actions
appropriate to the Board for its consideration.
it deems
Management is responsible for designing, implementing
and reporting on the adequacy of the Company’s risk
management and internal control system and has to report
to the Audit Committee on the effectiveness of:
•
the risk management and internal control system during
the year, and
•
the Company’s management of its material business risks.
CORPORATE GOVERNANCE STATEMENT
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Risk Management Group
The Company’s risk management policy and the operation of
the risk management and compliance system are managed
by the Company’s risk management group which consists of
senior executives chaired by the Chief Financial Offi cer. The
Board receives quarterly reports from this group as to the
effectiveness of the Company’s management of material risks
that may impede meeting business objectives.
The Chief Financial Offi cer and accounting staff, carry out regular
systematic monitoring of control activities and reports to both
relevant business unit management and the Audit Committee.
In addition, each business unit reports on the key business risks
in their area to the risk management group. The basis for this
report is a half-yearly review of the past performance of their
area of responsibility, and the current and future risks they face.
The review is undertaken by business unit management. Results
of Chief Financial Offi cer work are incorporated into this review
if applicable.
The risk management group consolidates the business unit
reports and recommends any actions to the Board for its
consideration.
Corporate Reporting
In complying with recommendation 7.3, the Managing
Director and Chief Financial Offi cer have made the following
certifi cations to the Board:
•
•
that the Company’s fi nancial reports are complete and
present a true and air view, in all material respects, of the
fi nancial condition and operational results of the Company
and Consolidated Entity and are in accordance with relevant
accounting standards
that the above statement is founded on a sound system of
risk management and internal compliance and control which
implements the policies adopted by the board and that the
Company’s risk management and internal compliance and
control is operating effi ciently and effectively in all material
respects in relation to fi nancial reporting risks.
Principle 8: Remunerate Fairly and
Responsibly
Remuneration and Nomination Committee
The membership of this Committee has been disclosed above.
The Remuneration and Nomination Committee, in performing its
remuneration function, advises the Board on remuneration and
incentive policies and practices generally, and makes specifi c
recommendations on remuneration packages and other terms
of employment for Executive Directors, other senior executives
and Non-Executive Directors.
Each member of the senior executive team signs a formal
Employment Contract at the time of their appointment covering
a range of matters including their duties, rights, responsibilities
and any entitlements on termination. The standard contract
refers to a specifi c formal job description.
Further information on Directors’ and Executives’ remuneration,
including principles used to determine remuneration, is set out
in the Directors’ Report under the heading “Remuneration
Report”.
In accordance with Consolidated Entity policy, participants in
equity-based remuneration plans are not permitted to enter
into any transactions that would limit the economic risk of
options or other unvested entitlements. Details of this policy
can be found on the Company’s website.
The Committee also assumes responsibility for overseeing
management succession planning, including the implementation
of appropriate executive development programmes and
ensuring adequate arrangements are
in place, so that
appropriate candidates are recruited for later promotion to
senior positions. This includes overseeing processes in relation
to meeting diversity objectives for executives and staff below
board level.
AUDITOR’S INDEPENDENCE DECLARATION
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
25 September 2012
Strike Resources Limited
The Board of Directors
Level 2, 160 St Georges Terrace
PERTH WA 6000
Dear Sirs,
DECLARATION OF INDEPENDENCE BY BRAD MCVEIGH TO THE DIRECTORS OF
STRIKE RESOURCES LIMITED
As lead auditor of Strike Resources Limited for the year ended 30 June 2012, I declare that, to the
best of my knowledge and belief, there have been no contraventions of:
•
•
the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Strike Resources Limited and the entities it controlled during the
period.
Brad McVeigh
Director
BDO Audit (WA) Pty Ltd
Perth, Western Australia
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BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
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Consolidated Statement of Comprehensive Income
for the year ended 30 June 2012
Revenue from continuing operations
Other income
Operating expenses
Personnel costs
Other corporate costs
Fair value adjustment -financial assets held as fair value through profit and loss
Impairment expense
Profit on sale of financial assets at fair value
Loss on sale of fixed assets
Loss on sale of investment in associate
Foreign exchange loss
Profit/(loss) before income tax
Income expense tax
Profit/(loss) from continuing operations
Profit/(loss) for the year
Profit/(loss) is attributable to:
Equity holders of Strike Resources Limited
Other comprehensive losses
Exchange differences on translation of foreign operations
Other comprehensive losses net of tax
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year is attributable to:
Equity holders of Strike Resources Limited
Basic earnings/(loss) per share (cents)
Diluted earnings/(loss) per share (cents)
Note
5
5
5
5
5
5
5
5
5
5
6
Consolidated Entity
2012
$
5,630,977
1,558,348
7,189,325
(271,616)
(2,235,607)
(2,025,915)
(2,055,850)
2011
$
2,663,221
1,704,408
4,367,629
(346,057)
(2,210,535)
(1,682,301)
-
(12,570,185)
(22,644,435)
-
(40,577)
(826,397)
1,785,620
(85,665)
-
-
(3,636,311)
(12,836,822)
(24,452,055)
(203,900)
(439,564)
(13,040,722)
(24,891,619)
(13,040,722)
(24,891,619)
(13,040,722)
(24,891,619)
(555,221)
(555,221)
(271,626)
(271,626)
(13,595,943)
(25,163,245)
27
27
(13,595,943)
(25,163,245)
(9.20)
(9.20)
(18.95)
(18.95)
This consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Consolidated Statement of Financial Position
for the year ended 30 June 2012
Current assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profi t or loss
Assets classifi ed as held for sale
Total current assets
Non-current assets
Trade and other receivables
Financial assets at fair value through profi t or loss
Property, plant and equipment
Exploration and evaluation expenditure
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained earnings
Total equity
Note
Consolidated Entity
2012
$
2011
$
8
9
10
7
9
10
12
13
14
15
14
16
17
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20,551,679
34,176,329
3,583,457
688,261
1,742,253
4,353,106
-
-
30,230,495
34,864,590
26,335
114,364
59,291
-
199,990
97,806
-
849,460
8,239,883
9,187,149
30,430,485
44,051,739
499,151
61,418
560,569
219,395
219,395
779,964
2,785,485
56,545
2,842,030
132,999
132,999
2,975,029
29,650,521
41,076,710
148,109,255
12,004,905
145,632,412
12,149,433
(130,463,639)
(116,705,135)
29,650,521
41,076,710
This consolidated statement of fi nancial position should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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Consolidated Statement of Changes in Equity
for the year ended 30 June 2012
Balance as at 30 June 2010
Total income for the period
Current period loss
Other comprehensive income
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share options
Option conversion
Share issue costs
Contributed
Equity
Currency
Translation
Reserve
Share-based
Payments
Reserve
Retained
Earnings
Total Equity
$
$
$
$
$
144,846,669
(359,274)
12,991,282
(92,048,857)
65,429,820
-
-
-
-
789,667
(3,924)
-
(271,626)
(271,626)
-
-
-
(24,891,619)
(24,891,619)
-
(271,626)
(24,891,619)
(25,163,245)
-
-
-
(210,949)
235,341
-
-
-
-
24,392
789,667
(3,924)
Balance as at 30 June 2011
145,632,412
(630,900)
12,780,333
(116,705,135)
41,076,710
Total income for the period
Current period loss
Other comprehensive income
Exchange differences on translation of foreign operations
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Share options
Option conversion
Exploration impairment
Share issue costs
-
-
-
-
(555,221)
(555,221)
-
-
-
(13,040,722)
(13,040,722)
-
(555,221)
(13,040,722)
(13,595,943)
2,250,000
235,303
-
(8,460)
-
-
-
-
410,693
(235,303)
2,425,390
-
-
-
-
235,303
(482,479)
(482,479)
-
(8,460)
Balance as at 30 June 2012
148,109,255
(1,186,121)
13,191,026
(130,463,639)
29,650,521
This consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
CONSOLIDATED STATEMENT OF CASH FLOWS
Consolidated Statement of Cash Flows
for the year ended 30 June 2012
Cash fl ows from operating activities
Receipts from customers and associate
Payments to suppliers and employees
Tax paid
Interest received
Note
Consolidated Entity
2012
$
2011
$
1,763,473
-
(4,232,584)
(3,188,005)
(203,900)
1,688,264
(439,564)
1,956,266
Net cash outfl ow from operating activities
25
(984,747)
(1,671,303)
Cash fl ows from investing activities
Exploration and evaluation expenditure
Payments for property, plant and equipment
Proceeds from sale of investments
Proceeds from sale of fi xed assets
Investment in listed entity
Investment in associate
Loan to associate – Apurimac Ferrum
Loan to others
(2,712)
(63,769)
1,889,236
70,200
(214,563)
(23,101)
(9,310,500)
(5,001,943)
(713,279)
(114,215)
3,209,309
37,140
-
(1,149,115)
(7,578,294)
(97,751)
Net cash outfl ow from investing activities
(12,657,152)
(6,406,205)
Cash fl ows from fi nancing activities
Proceeds from exercise of share options
Payments for share issue cost
Net cash infl ow from fi nancing activities
-
(8,460)
789,667
(3,924)
(8,460)
785,743
Net increase/(decrease) in cash and cash equivalents
(13,650,359)
(7,291,765)
Cash and cash equivalents at beginning of the year
Effect of exchange rate changes on cash balance
34,176,329
41,445,175
25,709
22,919
Cash and cash equivalents at year end
8
20,551,679
34,176,329
This consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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Notes to the Consolidated Financial Statements
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in the preparation
of these consolidated financial statements are set out below.
These policies have been consistently applied to all yeas
presented, unless otherwise stated. The financial statements
are for the consolidated entity consisting of Strike Resources
Limited, its subsidiaries and its interest in associate entities.
a) Basis of Preparation
These general purpose financial statements have been
prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting
Standards Board and the Corporations Act 2001. Strike
Resources Limited is a for-profit entity for the purpose of
preparing the financial statements.
(i) Compliance with IFRS
The consolidated financial statements of Strike
Resources Limited also comply with International
Financial Reporting Standards (“IFRS”) as issued by
the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the
Consolidated Entity
None of the new standards and amendments to
standards that are mandatory for the first time for
the financial year beginning 1 July 2011 affected any
of the amounts recognised in the current period or
any prior period and are not likely to affect future
periods. However, the adoption of the revised
AASB 124 Related Party Disclosures resulted in the
disclosure of additional related party transactions
and required the restatement of some comparative
information in note 22, and the adoption of AASB
1054 Australian Additional Disclosures and AASB 2011-
1 Amendments to Australian Accounting Standards
arising from the Trans-Tasman Convergence Project
enabled the removal of certain disclosures in relation
to commitments and the franking of dividends.
(iii) Early adoption of standards
The Consolidated Entity has not elected to apply any
pronouncements before their operative date in the
annual reporting period beginning 1 July 2011.
(iv) Historical cost convention
These financial statements have been prepared under
the historical cost convention, as modified by the
revaluation of financial assets and liabilities at fair
value though profit or loss, assets of disposal group
held for sale and capitalised exploration expenditure.
(v) Critical accounting estimates
The preparation of financial statements requires the
use of certain critical accounting estimates. It also
requires management to exercise its judgement in
the process of applying the Consolidated Entity’s
accounting policies. The area involving a higher
degree of judgement or complexity, or area where
assumptions and estimates are significant to the
financial statements, are disclosed in note 3.
b) Principles of Consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the
assets and liabilities of all subsidiaries of Strike Resources
Limited (“Company” or “Strike”) as at 30 June 2012 and
the results of all subsidiaries for the year then ended.
Strike Resources Limited and its subsidiaries together
are referred to in this financial report as Consolidated
Entity.
Subsidiaries are all entities over which the Consolidated
Entity has the power to govern the financial and operating
policies, generally accompanying a shareholding of more
than one-half of the voting rights. The existence and effect
of potential voting rights that are currently exercisable
or convertible are considered when assessing whether
the Consolidated Entity controls another entity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Subsidiaries are fully consolidated from the date on
which control is transferred to the Consolidated Entity.
They are de-consolidated from the date that control
ceases.
The acquisition method of accounting is used to
account for business combinations by the Consolidated
Entity (refer to note 1(h)).
Intercompany transactions, balances and unrealised
gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of the
impairment of the assets transferred. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies
adopted by the group.
in
interests
Non-controlling
the results and
equity of subsidiaries are shown separately in the
Consolidated Statement of Comprehensive Income,
Statement of Changes in Equity, and Consolidated
Statement of Financial Position respectively.
The cumulative post-acquisition movements are
adjusted against the carrying amount of the
investment. Dividends receivable from associates
are recognised as a reduction in the carrying
amount of the investment.
When the Consolidated Entity’s share of losses in
an associate equals or exceeds its interest in the
associate, including any other unsecured long-
term receivables, the Consolidate Entity does not
recognise any further losses, unless it has incurred
obligations or made payments on behalf of the
associate.
Unrealised gains on transactions between the
Consolidated Entity and its associates are eliminated
to the extent of the Consolidated Entity’s interest in
the associates. Unrealised losses are also eliminated
unless the transaction provides evidence of an
impairment of the asset transferred. Accounting
policies of associates have been changed where
necessary to ensure consistency with the policies
adopted by the Consolidated Entity.
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(ii) Associates
(iii) Changes in ownership interests
Associates are all entities over which
the
Consolidated Entity has signifi cant infl uence but not
control or joint control, generally accompanying a
shareholding of between 20% and 50% of the voting
rights. Investments in associates are accounted
for using the equity method of accounting, after
initially being recognised at cost. The Consolidated
Entity’s investment in associates includes goodwill
identifi ed on acquisition.
The Consolidated Entity’s share of its associates’
post-acquisition profi ts or losses is recognised
in profi t or loss and its share of post-acquisition
other comprehensive income is recognised in other
comprehensive income.
The Consolidated Entity treats transactions with
non-controlling interests that do not result in a loss
of control as transactions with equity owners of the
Consolidated Entity. A change in ownership interest
results in an adjustment between the carrying
amounts of the controlling and non-controlling
interests to refl ect their relative interests in the
subsidiary. Any difference between the amount of
the adjustment to non-controlling interests and
any consideration paid or received is recognised
in a separate reserve within equity attributable to
owners of Strike Resources Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
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When the Consolidated Entity ceases to have control
or significant influence, any retained interest in
the entity is remeasured to its fair value with the
change in carrying amount recognised in profit or
loss. The fair value is the initial carrying amount
for the purposes of subsequently accounting for
retained interest as an associate. In addition,
in Other
any amounts previously recognised
Comprehensive Income in respect of that entity
are accounted for as if the Consolidated Entity had
directly disposed of the related assets or liabilities.
This may mean that amounts previously recognised
in Other Comprehensive Income are reclassified to
profit or loss.
in an associate
is
interest
If the ownership
reduced but significant influence is retained, only
a proportionate share of the amounts previously
recognised in Other Comprehensive Income are
reclassified to profit or loss where appropriate.
c) Segment Reporting
Operating segments are reported in a manner consistent
with the internal reporting provided to the Managing
Director. The Managing Director is responsible for
allocating resources and assessing performance of the
operating segments.
d) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the financial statements of each
company in the Consolidated Entity are measured
using the currency of the primary economic
environment in which the entity operates (“the
functional currency”). The consolidated financial
statements are presented in Australian dollars,
which is Strike Resources Limited’s functional and
presentation currency.
(ii) Transactions and balances
transactions are
Foreign currency
translated
into functional currency using the exchange
rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from
the settlement of such transactions and from
the translation at the year-end exchange rates of
monetary assets and liabilities denominated in
foreign currencies are recognised in the Consolidated
Statement of Comprehensive Income, except when
they are deferred in equity as qualifying cash flow
hedges and qualifying net investment hedges or
are attributable to part of the net investment in a
foreign operation.
Foreign exchange gains or losses that relate to
borrowings are presented
in the Consolidated
Statement of Comprehensive Income within finance
costs. All other foreign exchange gains and losses
are presented in the Consolidated Statement of
Comprehensive Income on a net basis within other
income or operating expenses.
Non-monetary items that are measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value was
determined. Translation differences on assets and
liabilities carried at fair value are reported as part
of the fair value gain or loss.
(iii) Group companies
The results and financial position of foreign
operations (none of which has the currency of a
hyperinflationary economy) that have a functional
currency different from the presentation currency
are translated into the presentation currency as
follows:
•
assets and liabilities for each balance sheet
presented are translated at the closing rate at
the date of that balance sheet
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
•
income and expenses for Consolidated Statement
of Comprehensive Income are translated at average
exchange rates (unless this is not a reasonable
approximation of thecumulative effect of the rates
prevailing on the transaction dates, in which case
income and expenses are translated at the dates of
the transactions), and
•
all resulting exchange differences are recognised in
Other Comprehensive Income.
On consolidation, exchange differences arising from the
translation of any net investment in foreign entities, and
of borrowings and other fi nancial instruments designated
as hedges of such investments, are recognised in Other
Comprehensive Income. When a foreign operation is sold
or any borrowings forming part of the net investment
are repaid, the associated exchange differences are
reclassifi ed to profi t or loss, as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising on the
acquisition of a foreign operation are treated as assets
and liabilities of the foreign operation and translated at
the closing rate.
Revenue is recognised for the major business activities
as follows:
(i) Consultancy fees
Revenue from consulting services is recognised
in the accounting period in which the services are
rendered.
(ii) Sale of goods and disposal of assets
Revenue from the sale of goods and disposal of
other assets is recognised when the Consolidated
Entity has passed control and the risks and rewards
of ownership of the goods/assets to the buyer.
(iii) Interest income
Interest income is recognised using the effective
interest method. When a receivable is impaired, the
Consolidated Entity reduces the carrying amount
to its recoverable amount, being the estimated
future cash fl ow discounted at the original effective
interest rate of the instrument, and continues
unwinding the discount as interest income. Interest
income on impaired loans is recognised using the
original effective interest rate.
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e) Revenue Recognition
(iv) Dividends
Dividends are recognised as revenue when the
right to receive payment is established. This applies
even if they are paid out of pre-acquisition profi ts.
However, the investment may need to be tested for
impairment as a consequence, refer note 1(m).
(v) Other revenues
Other revenues are recognised on a receipts basis.
Revenue
is measured at the fair value of the
consideration received or receivable. Amounts disclosed
as revenue are net of returns, trade allowances, rebates
and amounts collected on behalf of third parties.
The Consolidated Entity recognises revenue when
the amount of revenue can be reliably measured. It is
probable that future economic benefi ts will fl ow to the
entity and specifi c criteria have been met for each of
the Consolidated Entity’s activities as described below.
The Consolidate Entity bases its estimates on historical
results, taking into consideration the type of customer,
the type of transaction and the specifi cs of each
arrangement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
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f) Income Tax
The income tax expense or revenue for the period is
the tax payable on the current period’s taxable income
based on the applicable income tax rate for each
jurisdiction adjusted by changes in deferred tax assets
and liabilities attributable to temporary differences and
for unused tax losses.
The current income tax charge is calculated on the basis
of the tax laws enacted or substantively enacted at the
end of the reporting period in the countries where the
Company’s subsidiaries and associates operate and
generate taxable
income. Management periodically
evaluates positions taken in tax returns with respect to
situations in which applicable tax regulation is subject
to
It establishes provisions where
appropriate on the basis of amounts expected to be paid
to the tax authorities.
interpretation.
Deferred income tax is provided in full, using the liability
method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying
amounts in the consolidated financial statements.
However, deferred tax liabilities are not recognised if
they arise from the initial recognition of goodwill.
Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in
a transaction other than a business combination that at
the time of the transaction affects neither accounting nor
taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or
substantially enacted by the end of the reporting period
and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Deferred tax assets and liabilities are not recognised
for temporary differences between the carrying amount
and tax bases of investments in foreign operations
where the Company is able to control the timing of the
reversal of the temporary differences and it is probable
that the differences will not reverse in the foreseeable
future.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets
and liabilities, and when the deferred tax balances relate
to the same taxation authority. Current tax assets and
tax liabilities are offset where the entity has a legally
enforceable right to offset and intends either to settle
on a net basis, or to realise the asset and settle the
liability simultaneously.
Current and deferred tax is recognised in profit or loss,
except to the extent that it relates to items recognised in
Other Comprehensive Income or directly in equity. In this
case, the tax is also recognised in Other Comprehensive
Income or directly in equity, respectively.
g) Leases
Leases in which a significant portion of the risks
and rewards of ownership are not transferred to the
Consolidated Entity as lessee are classified as operating
leases. Payments made under operating leases (net of
any incentives received from the lessor) are charged to
the Consolidated Statement of Comprehensive Income
on a straight-line basis over the period of the lease.
h) Business Combinations
The acquisition method of accounting is used to
account for all business combinations, regardless
of whether equity instruments or other assets are
the
acquired. The consideration
acquisition of a subsidiary comprises the fair values of
the assets transferred, the liabilities incurred and the
transferred
for
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
equity interests issued by the Consolidated Entity. The
consideration transferred also includes the fair value
of any asset or liability resulting from a contingent
consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifi ed assets acquired and liabilities and contingent
liabilities assumed in a business combination are, with
limited exceptions, measured initially at their fair values
at the acquisition date. On an-acquisition-by-acquisition
basis, the Consolidated Entity recognises any non-
controlling interest in the acquiree either at fair value
or at the non-controlling interest’s proportionate share
of the acquiree’s net identifi able assets.
The excess of the consideration transferred and the
amount of any non-controlling interest in the acquiree
over the fair value of the net identifi able assets
acquired is recorded as goodwill. If those amounts are
less than the fair value of the net identifi able assets
of the subsidiary acquired and the measurement
of all amounts has been reviewed, the difference is
recognised directly in the Consolidated Statement of
Comprehensive Income as a bargain purchase.
Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are
discounted at their present value as at the date of
exchange. The discount rate used is the Consolidated
Entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an
independent fi nancier under comparable terms and
conditions.
Contingent consideration is classifi ed either as equity
or a fi nancial liability. Amounts classifi ed as a fi nancial
liability are subsequently remeasured to fair value with
changes in fair value recognised in profi t or loss.
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i) Impairment of Assets
Goodwill and intangible assets that have an indefi nite
useful life are not subject to amortisation and are tested
annually for impairment or more frequently if events
or changes in circumstances indicate that they might
be impaired. Other assets are tested for impairment
whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable
amount.
The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purpose
of assessing impairment, assets are grouped at the
lowest levels for which they are separately identifi able
cash infl ows which are largely independent of the cash
infl ows from other assets or group of assets (cash-
generating units). Non-fi nancial assets other than
goodwill that suffered impairment are reviewed for
possible reversal of the impairment at the end of each
reporting period.
j) Cash and Cash Equivalents
For the purpose of presentation in the Consolidated
Statement of Cash Flows, cash and cash equivalents
includes cash on hand, deposits held at call with
fi nancial institutions, other short-term, highly liquid
investments with original maturities of three months or
less that are readily convertible to known amounts of
cash and which are subject to an insignifi cant risk of
changes in value, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities in the
Consolidated Statement of Financial Position.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
k) Trade Receivables
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Trade receivables are recognised initially at fair value
and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Trade receivables are generally due for settlement
within 30 days. They are presented as current assets
unless collection is not expected for more than 12
months after the reporting date.
Collectability of trade receivables is reviewed on an
ongoing basis. Debts which are known to be uncollectible
are written off by reducing the carrying amount directly.
An allowance account (provision for impairment of trade
receivables) is used when there is objective evidence
that the Consolidated Entity will not be able to collect
all amounts due according to the original terms of
the receivables. Significant financial difficulties of the
debtor, probability that the debtor will enter bankruptcy
or financial reorganisation, and default or delinquency
in payments (more than 30 days overdue) are considered
indicators that the trade receivable is impaired. The
amount of the impairment allowance is the difference
between the asset’s carrying amount and the present
value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to
short-term receivables are not discounted if the effect
of discounting is immaterial.
The amount of impairment loss is recognised in the
Income
Consolidated Statement of Comprehensive
within other expenses. When a trade receivable for which
an impairment allowance had been recognised becomes
uncollectable in a subsequent period, it is written off
against the allowance account. Subsequent recoveries
of amounts previously written off are credited against
other expenses in profit or loss.
l) Assets (or disposal groups) Held for Sale
and Discontinued Operations
Assets (or disposal groups) are classified as held for sale
if their carrying amount will be recovered principally
through a sale transaction rather than through
continuing use and a sale is considered highly probable.
They are measured at the lower of their carrying amount
and fair value less costs to sell.
An impairment loss is recognised for any initial or
subsequent write-down of the asset (or disposal group)
to fair value less costs to sell. A gain is recognised for
any subsequent increases in fair value less costs to sell
of an asset (or disposal group), but not in excess of any
cumulative impairment loss previously recognised. A
gain or loss not previously recognised by the date of the
sale of the asset (or disposal group) is recognised at the
date of de-recognition.
Assets (including those that are part of a disposal
group) are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses
attributable to the liabilities of a disposal group
classified as held for sale continue to be recognised.
Assets classified as held for sale and the assets of a
disposal group classified as held for sale are presented
separately from the other assets in the Consolidated
Statement of Financial Position. The liabilities of a
disposal group classified as held for sale are presented
separately from other liabilities in the Consolidated
Statement of Financial Position.
A discontinued operation is a component of the entity
that has been disposed of or is classified as held for sale
and that represents a separate major line of business or
geographical area of operations, is part of a single co-
ordinated plan to dispose of such a line of the business
or area of operations, or is a subsidiary acquired
exclusively with a view to resale.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The results of discontinued operations are presented
separately
the Consolidated Statement of
Comprehensive Income.
in
m) Investments and Other Financial Assets
Classifi cation
The Consolidated Entity classifi es its fi nancial assets in
the following categories: fi nancial assets at fair value
through profi t or loss, and loans and receivables. The
classifi cation depends on the purpose for which the
investments were acquired. Management determines
the classifi cation of its investment at initial recognition.
(i) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss
are fi nancial assets held for trading. A fi nancial asset
is classifi ed in this category if acquired principally
for the purpose of selling in the short term. Assets
in this category are classifi ed as current assets if
they are expected to be settled within 12 months;
otherwise they are classifi ed as non-current.
(ii) Loans and receivables
Loans and receivables are non-derivative fi nancial
assets with fi xed or determinable payments that are
not quoted in an active market. They are included
in current assets, except for those with maturities
greater than 12 months after the reporting period
which are classifi ed as non-current assets.
Financial assets-reclassifi cation
The Consolidated Entity may choose to reclassify non-
derivative trading fi nancial assets out of the held for
trading category if the fi nancial asset is no longer held
for the purpose of selling it in the near term.
Financial assets other than loans and receivables are
permitted to be reclassifi ed out of the held for trading
category only in rare circumstances arising from a
single event that is unusual and highly unlikely to recur
in the near term.
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In addition, the Consolidated Entity may choose to
reclassify fi nancial assets that would meet the defi nition
of loans and receivables out of held for trading if the
Consolidated Entity has the intention and ability to hold
these fi nancial assets for the foreseeable future or until
maturity at the date of reclassifi cation.
Reclassifi cations are made at fair value as of the
reclassifi cation date. Fair value becomes the new cost
or amortised cost as applicable, and no reversals of fair
value gains or losses recorded before reclassifi cation
date are subsequently made. Effective interest rates for
fi nancial assets reclassifi ed to loans and receivables are
determined at the reclassifi cation date. Further increases
in estimates of cash fl ows adjust effective interest rates
prospectively.
Recognition and de-recognition
Regular way purchases and sales of fi nancial assets
are recognised on trade-date - the date on which the
Consolidated Entity commits to purchase or sell the asset.
Financial assets are derecognised when the rights to
receive cash fl ows from the fi nancial assets have expired
or have been transferred and the Consolidated Entity
has transferred substantially all the risks and rewards of
ownership.
Measurement
At initial recognition, the Consolidated Entity measures a
fi nancial asset at its fair value plus, in case of a fi nancial
asset not at fair value through profi t or loss, transaction
costs that are directly attributable to the acquisition of
the fi nancial asset. Transaction costs of fi nancial assets
carried at fair value through profi t or loss are expensed
in the profi t or loss.
Loans and receivables are subsequently carried at
amortised cost using the effective interest method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
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A
Financial assets at fair value through profit or loss
are subsequently carried at fair value. Gains or losses
arising from changes in the fair value of the “financial
asset at fair value through profit or loss” category are
presented in profit or loss within Other Comprehensive
Income or Other Operating Expenses in the period in
which they arise. Dividend income from financial assets
at fair value through profit or loss is recognised in the
Consolidated Statement of Comprehensive
Income
as part of revenue from continuing operations when
the Consolidated Entity’s right to receive payments is
established. Interest income from these financial assets
is included in the net gains/(losses).
Details on how the fair value of financial instruments is
determined are disclosed in note 2.
Impairment
The Consolidated Entity assesses at the end of each
reporting period whether there is objective evidence
that a financial asset or group of financial assets is
impaired. A financial asset (or a group of financial assets)
is impaired and the impairment losses are incurred only
if there is objective evidence of impairment as a result
of one or more events that occurred after the initial
recognition of the asset (a “loss event”) and that loss
event (or events) has an impact on the estimated future
cash flows of the financial asset or group of financial
assets that can be reliably estimated.
(i) Assets carried at amortised cost
For loans and receivables, the amount of loss is
measured as the difference between the asset’s
carrying amount and the present value of estimated
future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial
asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the
loss is recognised in the profit or loss.
If, in a subsequent period, the amount of the
impairment loss decreases and the decrease can be
related objectively to an event occurring after the
impairment was recognised (such as an improvement
in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in
profit or loss.
n) Property, Plant and Equipment
All items of property, plant and equipment are stated
at historical cost less accumulated depreciation and
impairment losses. Historical cost includes expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate,
only when it is probable that future economic benefits
associated with the item will flow to the Consolidated
Entity and the cost of the item can be measured reliably.
The carrying amount of any component accounted for as
a separate asset is derecognised when replaced. All other
repairs and maintenance are charged to profit or loss
during the reporting period in which they are incurred.
Land is not depreciated. Depreciation on other assets is
calculated using the straight-line method to allocate their
cost or re-valued amounts, net of their residual values, over
their estimated useful lives or, in the case of leasehold
improvements, the shorter lease term as follows:
Furniture & fittings
Computer equipment
Plant & equipment
Leasehold improvements
15% to 66.67%
33.33% to 66.67%
20%
15%
The assets’ residual values and useful lives are reviewed,
and adjusted if appropriate, at the end of each reporting
period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount note 1(i).
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in profi t
or loss.
o) Intangible Assets
(i) Goodwill
Goodwill is measured as detailed in note 1(h). Goodwill
on acquisitions of subsidiaries is included in intangible
assets. Goodwill is not amortised but it is tested for
impairment annually or more frequently if events
or changes in circumstances indicate that it might
be impaired, and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal
of an entity include the carrying amount of goodwill
relating to the entity sold.
Goodwill is allocated to cash-generating units for the
purposes of impairment testing. The allocation is made
to those cash-generating units or groups of cash-
generating units that are expected to benefi t from
the business combination in which the goodwill arose,
identifi ed according to operating segments (note 4).
(ii) Mineral exploration and evaluation expenditure
Exploration and evaluation expenditure incurred is
initially capitalised in respect of each identifi able area
of interest where the Consolidated Entity has right of
tenure. These costs are only carried forward to the
extent that they are expected to be recouped through
the successful development of the area or where
activities in the area have not yet reached a stage that
permits reasonable assessment of the existence or
otherwise of economically-recoverable reserves.
Accumulated costs in relation to an abandoned area
are written off in full against profi t in the year in which
the decision to abandon the area is made.
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Under AASB 6 Exploration for and Evaluation of Mineral
Resources, if facts and circumstances suggest that the
carrying amount of any recognised exploration and
evaluation assets may be impaired, the Consolidated
Entity must perform impairment tests on those assets
and measure any impairment in accordance with
AASB 136 Impairment of Assets. Any impairment loss
is to be recognised as an expense. A regular review is
undertaken of each area of interest to determine the
appropriateness of continuing to carry forward costs in
relation to that area of interest.
p) Trade and Other Payables
These amounts represent liabilities for goods and services
provided to the Consolidated Entity prior to the end of the
fi nancial year which are unpaid. The amounts are unsecured
and are usually paid within 30 days of recognition. Trade
and other payables are presented as current liabilities
unless payment is not due within 12 months from the
reporting date. They are recognised initially at their fair
value and subsequently measured at amortised cost using
the effective interest method.
q) Employee Benefi ts
(i) Short-term obligations
Liabilities for wages and salaries, including non-
monetary benefi ts and annual leave expected to be
settled within 12 months after the end of the period
in which the employees render the related service are
recognised in respect of employees’ services up to the
end of the reporting period and are measured at the
amounts expected to be paid when the liabilities are
settled. The liability for annual leave is recognised in
the provision for employee benefi ts. All other short-
term employee benefi t obligations are presented as
payables.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave
which is not expected to be settled within 12 months
after the end of the period in which the employees
render the related service is recognised in the
provision for employee benefits and measured as
the present value of expected future payments to be
made in respect of services provided by employees up
to the end of the reporting period using the projected
unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee
departures and periods of service. Expected future
payments are discounted using market yields at the end
of the reporting period on national government bonds
with terms to maturity and currency that match, as
closely as possible, the estimated future cash outflows.
The obligations are presented as current liabilities in the
Consolidated Statement of Financial Position if the entity
does not have an unconditional right to defer settlement
for at least twelve months after the reporting date,
regardless of when the actual settlement is expected to
occur.
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A
the vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied. At
the end of each period, the entity revises its estimates
of the number of options that are expected to vest
based on the non-marketing vesting conditions. It
recognises the impact of the revision to original
estimates, if any, in profit or loss with a corresponding
adjustment to equity.
r) Contributed equity
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable to the
issue of new shares or options for the acquisition of a
business are included in the cost of the acquisition as part
of the purchase consideration.
s) Dividends
(iii) Share-based payments
Shared-based compensation benefits are provided to
employees via the Strike Resources Limited Employee
Option Plan. Information on these schemes is set out in
note 28.
Provision is made for the amount of any dividend
declared, being appropriately authorised and no longer
at the discretion of the entity, on or before the end of
the reporting period but not distributed at the end of the
reporting period.
The fair value of options granted under Strike
Resources Limited Employee Option Plan is recognised
as an employee benefits expense with a corresponding
increase in equity. The total amount to be expensed is
determined by reference to the fair value of the options
granted, which includes any market performance
conditions and the
impact of any non-vesting
conditions but excludes the impact of any service and
non-market performance vesting conditions.
Non-market vesting conditions are
in
assumptions about the number of options that are
expected to vest. The total expense is recognised over
included
t) Earnings per Share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Company,
excluding any costs of servicing equity other than
ordinary shares
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for
bonus elements in ordinary shares issued during the
year and excluding treasury shares.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in
the determination of basic earnings per share to take
into account:
•
•
the after income tax effect of interest andother
fi nancing costs associated with dilutive potential
ordinary shares, and
the weighted average number of additional shares
that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
u) Goods and Services Tax (“GST”)
(including Value Added Tax – “VAT”)
Revenues, expenses and assets are recognised net of the
amount of any associated GST (VAT), unless the GST
(VAT) incurred is not recoverable from the taxation
authority. In this case it is recognised as part of the cost
of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the
amount of GST (VAT) receivable or payable. The net
amount of GST recoverable from, or payable to, the
taxation authority is included with other receivables or
payables in the balance sheet.
Cash fl ows are presented on a gross basis. The GST
(VAT) components of cash fl ows arising from investing
or fi nancing activities which are recoverable from,
or payable to the taxation authority, are presented as
operating cash fl ows.
74
2
1
0
2
T
R
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E
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A
U
N
N
A
75
2
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L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements (continued)
v) New Accounting Standards and Interpretations
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods.
The Consolidated Entity’s assessment of the impact of these new standards and interpretations is set out below:
AASB
reference
Title and Affected
Standard(s)
AASB 10
(issued
August 2011)
Consolidated Financial
Statements
Nature of Change
Introduces a single ‘control model’ for all entities, including
special purpose entities (SPEs), whereby all of the following
conditions must be present:
•
Power over investee (whether or not power used in
practice)
Exposure, or rights, to variable returns from investee
Ability to use power over investee to affect the entity’s
returns from investee.
•
•
Application
date of
standard
Annual reporting
periods
commencing on
or after 1 January
2013
Impact on financial
statements
this
standard
When
is first
adopted for the year ended 30
June 2014, there will be no impact
transactions and balances
on
financial
the
recognised
statements because the entity
does not have any special purpose
entities.
in
AASB 10
(issued
August 2011)
Consolidated Financial
Statements
Introduces the concept of ‘de facto’ control for entities with less
than a 50% ownership interest in an entity, but which have a
large shareholding compared to other shareholders. This could
result in more instances of control and more entities being
consolidated.
Annual reporting
periods
commencing on
or after 1 January
2013
When this standard is first adopted for
the year ended 30 June 2014, there
will be no impact on transactions and
balances recognised in the financial
statements.
AASB 10
(issued
August 2011)
AASB 11
(issued
August 2011)
Consolidated Financial
Statements
Potential voting rights are only considered when determining if
there is control when they are substantive (holder has practical
ability to exercise) and the rights are currently exercisable. This
may result in possibly fewer instances of control.
Joint Arrangements
Joint arrangements will be classified as either ‘joint operations’
(where parties with joint control have rights to assets and
obligations for liabilities) or ‘joint ventures’ (where parties with
joint control have rights to the net assets of the arrangement).
Joint arrangements structured as a separate vehicle will
generally be treated as joint ventures and accounted for using
the equity method (proportionate consolidation no longer
allowed).
Annual reporting
periods
commencing on
or after 1 January
2013
Annual reporting
periods
commencing on
or after 1 January
2013
Fair Value
Measurement
AASB 13
(issued
September
2011)
Currently, fair value measurement requirements are included
in several Accounting Standards. AASB 13 establishes a single
framework for measuring fair value of financial and non-financial
items recognised at fair value in the statement of financial
position or disclosed in the notes in the financial statements.
Annual reporting
periods
commencing on
or after 1 January
2013
Fair Value
Measurement
AASB 13
(issued
September
2011)
Additional disclosures required for items measured at fair value
in the statement of financial position, as well as items merely
disclosed at fair value in the notes to the financial statements.
Extensive additional disclosure requirements
items
measured at fair value that are ‘level 3’ valuations in the fair
value hierarchy that are not financial instruments, e.g. land and
buildings, investment properties etc.
for
Annual reporting
periods
commencing on
or after 1 January
2013
Potential voting rights are not
substantive.
When this standard is first adopted
for the year ended 30 June 2014, there
will be no impact on transactions
and balances recognised
in the
financial statements because the
entity has not entered into any joint
arrangements.
The entity has yet to conduct a
detailed analysis of the differences
between the current fair valuation
methodologies used and those
required by AASB 13. However,
when this standard is adopted for
the first time for the year ended
30 June 2014, there will be no
impact on the financial statements
because the revised fair value
measurement requirements apply
prospectively from 1 July 2013.
When this standard is adopted for the
first time for the year ended 30 June
2014, additional disclosures will be
required about fair values.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AASB
reference
Title and Affected
Standard(s)
AASB 2011-9
(issued
September
2011)
Amendments to
Australian Accounting
Standards -
Presentation of Items of
Other Comprehensive
Income
Application
date of
standard
Annual periods
commencing on or
after 1 July 2012
Nature of Change
Amendments to align the presentation of items of other
comprehensive income (OCI) with US GAAP.
Various name changes of statements in AASB 101 as follows:
statement of comprehensive income – to be referred to
•
as ‘statement of profi t or loss and other comprehensive
income’
statements – to be referred to as ‘statement of profi t or
loss’ and ‘statement of comprehensive income’.
•
OCI items must be grouped together into two sections: those
that could subsequently be reclassifi ed into profi t or loss
and those that cannot.
AASB 119
(reissued
September
2011)
Employee Benefi ts
Main changes include:
•
Elimination of the ‘corridor’ approach for deferring
gains/losses for defi ned benefi t plans
Annual periods
commencing on or
after January 2013
•
•
• Actuarial gains/losses on remeasuring the defi ned
benefi t plan obligation/asset to be recognised in OCI
rather than in profi t or loss, and cannot be reclassifi ed
in subsequent periods
Subtle amendments to timing for recognition of
liabilities for termination benefi ts
Employee benefi ts expected to be settled (as opposed
to due to settled under current standard) wholly within
12 months after the end of the reporting period are
short-term benefi ts, and therefore not discounted when
calculating leave liabilities. Annual leave not expected
to be used wholly within 12 months of end of reporting
period will in future be discounted when calculating
leave liability.
AASB 12
(issued
August 2011)
Disclosure of Interests
in Other Entities
Combines existing disclosures from AASB 127 Consolidated
and Separate Financial Statements, AASB 128 Investments
in Associates and AASB 131 Interests in Joint Ventures.
Introduces new disclosure requirements for
interests
in associates and joint arrangements, as well as new
requirements for unconsolidated structured entities.
Annual reporting
periods
commencing on
or after 1 January
2013
IFRS (issued
December
2011)
Mandatory Effective
Date of IFRS 9 and
Transition Disclosures
Entities are no longer required to restate comparatives on
fi rst time adoption. Instead, additional disclosures on the
effects of transition are required.
Annual reporting
periods
commencing on
or after 1 January
2015
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A
Impact on fi nancial statements
When this standard is fi rst adopted for
the year ended 30 June 2013, there will
be no impact on amounts recognised for
transactions and balances for 30 June 2013
(and comparatives). However, the statement
of comprehensive income will include name
changes and include subtotals for items of
OCI that can subsequently be reclassifi ed to
profi t or loss in future (e.g. foreign currency
translation reserves) and those that cannot
subsequently be reclassifi ed (e.g. fi xed
asset revaluation surpluses).
The entity currently calculates its liability
for annual leave employee benefi ts on the
basis that it is due to be settled within 12
months of the end of the reporting period
because employees are entitled to use this
leave at any time. The amendments to AASB
119 require that such liabilities be calculated
on the basis of when the leave is expected
to be taken, i.e. expected settlement.
When this standard is fi rst adopted for
30 June 2014 year end, annual leave
liabilities will be recalculated on 1 July
2012 as short-term benefi ts because
they are expected to be settled wholly
within 12 months after the end of the
reporting period, there will be no impact
on the classifi cation and balances
recognised in the fi nancial statements.
As this is a disclosure standard only,
there will be no impact on amounts
recognised in the fi nancial statements.
However, additional disclosures will
be required for interests in associates
and joint arrangements, as well as for
unconsolidated structured entities.
As comparatives are no longer required
to be restated, there will be no impact
on amounts recognised in the financial
statements. However, additional disclosures
will be required on transition, including the
quantitative effects of reclassifying financial
assets on transition.
There are no other standards that are not yet effective and that are expected to have material impact on the entity in the current or future
reporting periods and on foreseeable future transactions.
w) Parent Entity Financial Information
The fi nancial information for the parent entity, Strike Resources Limited, disclosed in Note 29 has been prepared on the same basis as
the consolidated fi nancial statements.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Financial Risk Management
Financial Risk Management Objectives and Policies
The Consolidated Entity’s financial instruments mainly consist of deposits with banks, accounts receivable and payable and loans to
related parties. The main risks arising from the Consolidated Entity’s financial instruments are interest rate risk, foreign exchange risk,
credit risk, equity price risk and liquidity risk.
The Board of Directors’ is responsible for the overall internal control framework (which includes risk management) but no cost-effective
internal control system will preclude all errors and irregularities. The system is based, in part, on the appointment of suitably-qualified
management personnel in conjunction with a range of policies and procedures, which incorporate monitoring and reporting mechanisms,
to assist in the management of the various risks to which the business is exposed. The effectiveness of the system is continually
reviewed by management and at least annually by the Board.
The Consolidated Entity holds the following instruments.
Financial assets
Cash
Receivables
Variable interest rate
Fixed interest rate
Non-interest bearing
Total Equity
2012
$
2011
$
2012
$
2011
$
2012
$
2011
$
2012
$
2011
$
380,586
1,152,637
18,236,381
32,525,164
1,924,634
498,528
20,541,601
34,176,329
Loan receivable
3,038,997
Financial assets
-
-
-
-
-
-
-
-
-
-
-
570,795
786,067
570,795
786,067
-
1,856,617
-
-
3,038,997
1,856,617
-
-
3,419,583
1,152,637
18,236,381
32,525,164
4,352,046
1,284,595
26,008,010
34,962,396
Financial liabilities
Payables
-
-
-
-
(741,915)
(2,703,170)
(741,915)
(2,703,170)
Net financial assets
3,419,583
1,152,637
18,236,381
32,525,164
3,610,131
(1,418,575)
25,266,095
32,259,226
a) Market Risk
(i) Foreign Exchange Risk
The Consolidated Entity operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar, Indonesian Rupiah (IDR), Perúvian Nuevo Soles and Canadian dollar.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that
is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
The Consolidated Entity has a policy of not hedging foreign exchange risk and therefore has not entered into any hedging against
movements in foreign currencies against the Australian dollar, including forward exchange contracts, as at the reporting date and is
currently fully exposed to foreign exchange risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Entity’s exposure to foreign exchange risk expressed in Australian dollar at the reporting date was as follows:
USD
CAD
Others
2012
2011
2012
2011
2012
2011
1,622,747
183,032
-
25,796
350,179
-
-
-
-
-
1,856,617
3,013,201
-
97,750
-
-
46,113
23,566
-
-
-
-
-
-
(410,802)
1,420,773
(174,719)
175,460
-
4,869,818
(149,145)
(51,395)
(12,799)
33,314
(36,090)
(12,524)
Financial assets
Cash at bank
Receivables
Financial assets at fair value
through profi t or loss
Loan receivable
Financial liabilities
Payables
Sensitivity
The Consolidated Entity has performed a sensitivity analysis on its exposure to exchange risk. The management assessment is based upon
an analysis of current and future market position. The analysis demonstrates the effect on the current-year results and equity when the
Australian dollar strengthened or weakened by 10% (2011: 10%) against the foreign currencies detailed above, with all the other variables
held constant.
Change in profi t
increase by 10%
decrease by 10%
Change in equity
increase by 10%
decrease by 10%
Consolidated Entity
2012
$
2011
$
(574,900)
702,656
(574,900)
702,656
(17,397)
(4,298)
(17,397)
(4,298)
78
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
79
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2. Financial Risk Management (continued)
(ii) Price Risk
The Consolidated Entity is exposed to equity securities price risk. This arises from investments held by the Consolidated Entity and
classified in the balance sheet as fair value through profit or loss. The Consolidated Entity is not exposed to commodity price risk.
At the share investment portfolio level, the Consolidated Entity is not overly exposed (by majority of its net assets) to one company
or one particular industry sector of the market.
The table below summaries the impact of increases/decreases of the equity index on the Consolidated Entity’s post-tax profit for the
year. The analysis is based on the assumption that the equity index has increased by 9%/decreased by 6% with all other variables held
constant.
increase by 9%
decrease by 6%
(iii) Interest Rate Risk
Impact on post-tax profit
Impact on other components
of equity
2012
$
2011
$
2012
$
2011
$
10,293
(6,862)
-
-
-
-
-
-
Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Consolidated
Entity’s exposure to market risk for changes in interest rates relate primarily to investments held in interest-bearing cash deposits.
Cash at bank
Term deposit
Weighted average interest rates
Consolidated Entity
2012
$
2,305,220
18,236,381
20,541,601
5.06%
2011
$
1,651,165
32,525,164
34,176,329
6.04%
The Consolidated Entity has performed a sensitivity analysis on its exposure to interest rate risk at the reporting date. The management
assessment is based upon an analysis of current and future market conditions, in particular comments from the Reserve Bank of Australia
on the likely movement of interest rates. The analysis demonstrates the potential effect on the current year results and equity which could
result from a change in these risks.
Change in profit
increase by 25bps (2011: 25bps)
decrease by 25bps (2011: 25bps)
Change in equity
increase by 25bps (2011: 25bps)
decrease by 25bps (2011: 25bps)
Consolidated Entity
2012
$
2011
$
46,542
(46,542)
81,438
(81,438)
46,542
(46,542)
81,438
(81,438)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
b) Credit Risk
Credit risk refers to the risk that a counterparty under a fi nancial instrument will default (in whole or in part) on its contractual
obligations resulting in fi nancial loss to the Consolidated Entity. Concentrations of credit risk are minimised primarily by
undertaking appropriate due diligence on potential investments, carrying out all market transactions through approved
brokers, settling non-market transactions with the involvement of suitably qualifi ed legal and accounting personnel (both
internal and external), and obtaining suffi cient collateral or other security (where appropriate) as a means of mitigating the
risk of fi nancial loss from defaults.
Pursuant to the Cuervo Investment Agreement, the Company has a mortgage over the concessions held by Minera Cuervo
S.A.C a wholly owned subsidiary of Cuervo Resources Inc. In addition, the Company holds a pledge over the shares of Minera
Cuervo S.A.C., both securities are exercisable if Cuervo defaults under Investment Agreement.
The loan to Apurimac Ferrum S.A. is secured through a fi rst ranking mortgage over all of the concessions included in the
Mortgage Agreement signed between Strike Finance Pty Ltd and Apurimac Ferrum S.A.
The credit quality of the fi nancial assets are neither past due nor impaired and can be assessed by reference to external
credit ratings (if available with Standard & Poor’s) or to historical information about counterparty default rates:
Cash and cash equivalents
AA
A+
A
BB
BBB+
No external credit rating available
Receivables and loans
AA
A+
A
BB
BBB+
No external credit rating available
Consolidated Entity
2012
$
2011
$
14,376,627
500,000
5,649,550
-
-
27,466,469
6,300,000
403,717
-
-
15,424
6,143
20,541,601
34,176,329
133,426
1,528
47,260
-
-
474,692
92,032
-
-
-
3,427,578
24,151,393
219,343
34,962,396
The Consolidated Entity measures credit risk on a fair-value basis. The carrying amount of fi nancial assets recorded in the fi nancial
statements, net of any provision for losses, represents the Consolidated Entity’s maximum exposure to credit risk.
All receivables noted above, except interest on term deposits, are due within 30 days. None of the above receivables are past due.
80
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Financial Risk Management (continued)
c) Liquidity Risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due
and to close out the market positions. At the end of the reporting period the Consolidated Entity held deposits of $18,236,381
(2011: $32,525,164) that mature within the next 3 months after 30 June 2012 that are expected to readily generate cash inflows for
managing liquidity risk.
The financial liabilities disclosed have the following maturity obligation:
81
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Non-interest bearing
less than 6 months
6 to 12 months
Interest-bearing
between 1 & 2 years
between 2 & 5 years
Consolidated Entity
2012
$
2011
$
522,520
219,395
741,915
-
-
-
2,785,485
-
2,785,485
132,999
-
132,999
The amounts disclosed are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances
as the impact of discounting is not significant.
d) Net Fair Value of Financial Assets and Liabilities
The carrying amounts of financial instruments recorded in the financial statements represent their fair value determined in
accordance with the accounting policies disclosed in Note 3(f). The aggregate fair value and carrying amount of financial assets at
the reporting date are set out in Notes 9 and 10. The carrying amount of the financial liabilities at the reporting date as set out in
Note 14 approximates the current fair value.
e) Fair Value Measurements
The fair value of financial instruments traded in active markets is based on quoted market prices at the end of the reporting period.
The quoted market price used for financial assets held by the Consolidated Entity is the current bid price. These instruments are
included in level 1.
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. These
valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific
estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case
for unlisted equity securities.
The fair value of financial instruments must be estimated for recognition and measurement or for disclosure purposes.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value
measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(b
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following
table presents the Consolidated Entity’s fi nancial instruments measured and recognised at fair value at 30 June 2012 and
30 June 2011.
2012
Assets
Financial assets at fair value through profi t or loss
- Trading securities
Available-for-sale fi nancial assets
- Equity securities
Total assets
2011
Assets
Financial assets at fair value through profi t or loss
- Trading securities
Available-for-sale fi nancial assets
- Equity securities
Total assets
82
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Level 1
$
Level 2
$
Level 3
$
Total
$
114,364
1,742,253
-
-
114,364
1,742,253
Level 1
$
Level 2
$
Level 3
$
-
-
-
-
-
-
-
-
-
-
-
-
1,856,617
-
1,856,617
Total
$
-
-
-
83
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Critical Accounting Estimates and Judgements (continued)
Estimates and judgements are continually evaluated and
are based on historical experience and other factors,
including expectations of future events that may have a
financial impact on the entity and that are believed to be
reasonable under the circumstances.
a) Impairment of Assets Classified as Held for Sale
The Consolidated Entity, through a co-operation
agreement with the concession holder PT KJB, holds
a coal mining right over the Berau coal concession.
As a result of changes to the Indonesian mining law
which resulted in inconsistencies between the enacted
legislation and the Co-operation Agreement, both parties
to the agreement are in the process of negotiating to
resolve the issues that have arisen.
The Co-operation Agreement provides that if any of
its provisions conflict with any law the parties must
negotiate in good faith to agree on amendments to
address the issue(s). Due to drawn out nature of the
negotiations and the failure to date of Strike and PT KJB
to resolve the dispute over the future development of the
Berau Thermal Coal Project, management has deemed it
prudent to impair the carrying value of the capitalised
exploration and evaluation expenditure in relation to this
project.
The impairment charge against the value of the
capitalised exploration and evaluation expenditure
in relation to the Berau Project has been expensed
through the Consolidated Statement of Comprehensive
Income in the calculation of profit or loss in the
current period. Management continues to monitor
the status of negotiations with PT KJB in relation to
the Berau Project and will review the carrying value
of the exploration and evaluation asset accordingly.
b) Impairment of Capitalised Exploration and
Evaluation Expenditure
The future recoverability of capitalised exploration
and evaluation expenditure is dependent on a number
of factors, including the Consolidated Entity’s ability
to develop the relevant area of interest itself or, if not,
whether it can successfully recover the capitalised
exploration and evaluation asset through sale.
Factors that could impact the future recoverability
include the grade and quantity of mineral resources,
future technological changes which impact the cost
of mining, future legal changes (including changes to
environmental restoration obligations), changes to
commodity prices and right of tenure.
c) Share-based Payment Transactions
The Consolidated Entity measures the cost of equity-
settled transactions with Directors and employees by
reference to the fair value of the equity instruments
at the date at which they are granted, and applying an
estimated probability that they will vest. The fair value
is determined using a Black-Scholes option valuation
model, with the assumptions detailed in Note 28. The
accounting estimates and assumptions relating to equity-
settled, share-based payments would have no impact on
the carrying amounts of assets and liabilities within the
next annual reporting period but may impact expenses
and equity.
d) Fair Value of Investment in Associate
On the reclassification of a subsidiary to an associate
due to the “loss of control”, the Consolidated Entity is
required to fair-value the investment in the associate
on initial recognition. Where the investment relates to
an investment in an entity with quoted securities the
Consolidated Entity values the investment with reference
to the bid price of the securities on the day the control
is lost. Where there is no active market in the securities
of the fair-valued financial asset the Consolidated Entity
determines the fair value of the investment by reference
to, among other things, the following:
Current market conditions;
•
Expected future cash flows; and
•
Fair value of similar financial instruments or entities
•
based on arm’s length market transactions between
knowledgeable willing parties.
When determining the fair value of an investment for
which there is no active market the Consolidated Entity
uses valuation techniques that best suit the financial
asset being valued. Valuations are inherently subjective
and the Consolidated Entity makes critical judgements
and estimates when determining both the type and
quantum of inputs used in the valuation model.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
f) Fair Value Estimation
The fair value of fi nancial assets and fi nancial liabilities
must be estimated for recognition and measurement
or for disclosure purposes. The fair value of fi nancial
instruments traded in active markets (such as publicly-
traded derivatives, and trading and available-for-sale
securities) is based on quoted market prices at the
reporting date. The quoted market price used for
fi nancial assets held by the Consolidated Entity is the
current bid price and the appropriate quoted market
price for fi nancial liabilities is the current ask price.
The fair value of fi nancial instruments that are not
traded in an active market (for example over-the-
counter derivatives) is determined using valuation
techniques. The Consolidated Entity may use a variety
of methods and makes assumptions that are based on
market conditions existing at each reporting date. Other
techniques, such as estimated discounted cash fl ows, are
used to determine fair value for the remaining fi nancial
instruments.
The nominal value less estimated credit adjustments
of trade receivables and payables are assumed to
approximate their fair values. The fair value of fi nancial
liabilities for disclosure purposes is estimated by
discounting the future contractual cash fl ows at the
current market interest rate that is available to the
Consolidated Entity for similar fi nancial instruments.
84
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
During a prior reporting period the Consolidated Entity
engaged an “Independent Expert” to fair-value its investment
in an associate entity (Apurimac Ferrum S.A.). As the value of
the associate was deemed to be represented by the value of
the underlying exploration projects held by the entity and, due
to the early exploration phase of the project, it was determined
that the empirical/yardstick valuation method would be the
most appropriate method to use in determining a fair value.
After receiving an initial independent valuation of the
investment, due to the inherently uncertain nature of the
inputs used in the valuation model (including the uncertainty
surrounding the global economic climate, at the reporting
date) the Board of the Consolidated Entity exercised its
discretion and decided that for fi nancial reporting purposes,
it would be prudent to maintain a full impairment of the
value of its shareholding in Apurimac Ferrum S.A. (2011: full
impairment). The Board and management of the Consolidated
Entity continue to pursue the development of the iron ore
projects held by Apurimac Ferrum S.A., along with its partners,
and expect to re-evaluate the carrying value of the asset
when a more robust valuation model is able to be used.
e) Treatment of Investment in Apurimac Ferrum S.A. as an
Associate
On 30 June 2011 Strike Resources Limited increased its
shareholding in Apurimac Ferrum S.A. (“AF”) from 44% to
56%. This shareholding was maintained until 22 June 2012,
when the Company sold 50% of the shareholding (being 6%
of shareholding in Apurimac Ferrum S.A.), and 50% of the
debt owned by AF, which were acquired from Iron Associates
Corporation on 30 June 2011.
Pursuant to AASB 127 Consolidated and Separate Financial
Statements control is defi ned as “the power to govern
the fi nancial and operating policies so as to obtain a
benefi t from those activities”, and is normally presumed
for a shareholding of greater than 50%. However, in the
case of Strike’s investment in AF, the voting rights of
AF’s shareholders are governed by the terms of the “AF
Settlement Agreement”, which was executed in July 2009,
until July 2012. This agreement requires unanimous support
from all AF shareholders for a motion to be carried at a
shareholders meeting. As a result of this requirement the
board of Strike has determined that “control” does not exist
and therefore Strike doesn’t consolidate AF when presenting
its consolidated fi nancial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
85
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
4. Segment Information
a) Description of segments
Management has determined the operating segments based on the reports reviewed by the Board of Directors that are used to
make strategic decisions.
The Board of Directors considers the business from both a product and a geographic perspective and has identified three reportable
segments as follows:
Australia
•
Indonesia (Thermal Coal)
•
Perú (Iron Ore)
•
b) Segment information provided to the Board of Directors
The segment information provided to the Board of Directors for the reportable segments for the year ended 30 June 2012 and
30 June 2011 are as follows:
2012
Interest revenue
Fees for consulting to Apurimac Ferrum S.A.
Foreign exchange gain/(loss)
Inter-segment revenue
Revenue from external customers
Adjusted EBITDA
Depreciation and amortisation
Personnel costs
Impairment losses:
- Resource projects
- Land
- Investment in associated entity
- Loan to Cuervo Resources Inc
- Loans to associated entity
Fair value adjustment – financial assets held as fair
value through profit or loss
Loss/(gain) on sale of investment
Indonesia
Perú
Australia
Total
84
-
(541,818)
-
(541,734)
-
-
-
-
-
5,630,893
5,630,977
835,942
1,264,224
-
835,942
722,406
-
7,731,059
7,189,325
(3,632,418)
(370,906)
(24,412,801)
(28,416,125)
(2)
-
-
-
(77,521)
(77,523)
(2,235,607)
(2,235,607)
(2,657,633)
(218,303)
(219,305)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,688,034
(2,875,936)
(219,305)
1,688,034
(2,125,576)
(2,125,576)
(7,326,445)
(7,326,445)
2,055,850
2,055,850
(2,537,354)
(2,537,354)
Total segment assets
Total segment liabilities
4,363,184
477,501
25,810,008
30,650,693
(10,619,550)
(3,443,885)
(426,889)
(14,490,324)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2011
Interest revenue
Fees for consulting to Apurimac Ferrum S.A.
Foreign exchange gain/(loss)
Inter-segment revenue
Revenue from external customers
Adjusted EBITDA
Depreciation and amortisation
Personnel costs
Impairment losses:
- Resource projects
- Investment in associated entity
- Loans to associated entity
Loss/(gain) on sale of investment
Total segment assets
Total segment liabilities
c) Other segment information
(i) Segment revenue
Indonesia
Perú
Australia
Total
456
16,820
-
-
17,276
-
-
-
-
-
2,662,765
1,638,726
48,862
-
2,663,221
1,655,546
48,862
-
4,350,353
4,367,629
(13,787,146)
(53,534)
(20,375,707)
(34,216,387)
(15,729)
(57,554)
(13,465,031)
-
-
-
(2,158)
(128,741)
(146,628)
-
-
-
-
-
(2,152,980)
(2,210,534)
(2,879)
(13,467,910)
(3,399,115)
(5,777,410)
1,785,620
(3,399,115)
(5,777,410)
1,785,620
8,665,001
659,400
50,202,206
59,526,607
(10,683,971)
(3,115,311)
(2,794,477)
(16,593,759)
86
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Segment revenue reconciles to total revenue as per the Consolidated Comprehensive Income:
Revenue
Revenue
Other income
2012
$
2011
$
5,630,977
1,558,348
7,189,325
2,663,221
1,704,408
4,367,629
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Segment Information (continued)
(ii) Adjusted EBITDA
A reconciliation of adjusted EBITDA to operating profit before income tax is provided as follows:
87
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Adjusted EBITDA
Intersegment eliminations
Depreciation
Profit before tax from continuing operations
2012
$
2011
$
(28,416,125)
(34,216,387)
15,656,826
(77,523)
9,910,960
(146,628)
(12,836,822)
(24,452,055)
(12,836,822)
(24,452,055)
(12,836,822)
(24,452,055)
(iii) Segment assets and segment liabilities
Reportable segments’ assets and liabilities are reconciled to total assets and liabilities respectively as follows:
Segment assets
Intersegment eliminations
Total assets as per the Consolidated Statement of Financial Position
Segment liabilities
Intersegment eliminations
Total liabilities as per the Consolidated Statement of Financial Position
2012
$
2011
$
30,650,693
59,526,607
(220,208)
(15,474,868)
30,430,485
44,051,739
(14,490,324)
(16,593,759)
13,710,360
13,618,730
(779,964)
(2,975,029)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Profi t/(Loss) for the Year
a) Revenue
Revenue from continuing operations
Interest received – Cuervo loan
Interest received – Cash on deposit
Other income
Foreign exchange gain
Consulting fees
Other income
Total revenue and other income
b) Expenses
Operating expenses
Occupancy costs
Finance costs
Borrowing costs – interest paid
Personnel costs
Cash remuneration
Directors’ and employees’ options
Administration costs
Consultancy fees
Professional fees
Depreciation
Other corporate expenses
Impairment losses
Resource projects
Land
Investment in associate entity
Loan to Cuervo Resources Inc.
Loans to associated entity
Fair value adjustment – fi nancial assets held as fair value through profi t or loss
Loss/(gain) on sale of investment
Loss on disposal of property, plant and equipment
Foreign exchange loss
88
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Consolidated Entity
2012
$
2011
$
3,697,727
1,933,250
5,630,977
722,406
835,942
-
1,558,348
-
2,663,221
2,663,221
-
1,655,546
48,862
1,704,408
7,189,325
4,367,629
257,804
13,812
-
271,616
1,824,914
410,693
2,235,607
386,999
350,109
77,523
1,211,284
2,025,915
2,875,936
219,305
22,923
2,125,576
7,326,445
12,570,185
2,055,850
826,397
40,577
-
2,922,824
327,309
18,748
-
346,057
2,186,141
24,394
2,210,535
229,255
417,507
146,629
888,910
1,682,301
13,467,910
-
3,399,115
-
5,777,410
22,644,435
-
(1,785,620)
85,665
3,636,311
1,936,356
Total expenses
20,026,147
28,819,684
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
89
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
6. Income Tax Expense
(a) Income tax expense
Current tax
Deferred tax
Income tax expense attributable to:
Profit from continuing operations
Profit from discontinued operations
Aggregate income tax expense
(b) Numerical reconciliation between tax expense and pre-tax net profit/(loss)
Profit/(loss) from continuing operations before income tax
Income-tax expense/(benefit) on above at 30%
Increase in income tax due to:
Non-deductible expenses and foreign losses
Current year tax losses not recognised
Movement in unrecognised temporary differences
Capital gains
Decrease in income tax expenses due to:
Non assessable income
Utilisation of prior year tax losses
Deductible equity raising costs
Net gain or loss of control of AF and IAC
Effect of current-year revenue losses not recognised
Under provision for prior-year taxable income
Foreign jurisdiction withholding tax
Income-tax expense attributable to operating profit
(c) Deferred tax assets not brought to account
On income-tax account
- Carry-forward tax losses
- Other
On capital account
- Carry-forward tax losses
- Unrealised capital losses
Total deferred tax assets not brought to account
(d) Deferred tax liabilities
Timing differences
Offset by deferred tax assets recognised
Consolidated Entity
2012
$
2011
$
203,900
-
203,900
203,900
-
203,900
439,564
-
439,564
439,564
-
439,564
(12,836,822)
(12,836,822)
(24,452,055)
(24,452,055)
(3,851,046)
(7,335,616)
2,214,454
55,608
2,558,411
-
4,320,752
-
-
731,811
-
(719,752)
(257,675)
-
-
-
203,900
203,900
6,612,251
20,633,332
27,245,583
-
-
-
27,245,583
482,465
(482,465)
-
1,096,202
(731,811)
(328,368)
-
2,247,030
653
438,911
439,564
7,448,146
-
7,448,146
-
-
-
7,448,146
628,619
(628,619)
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The deferred tax asset not brought to account for the 2012 and 2011 years will only be obtained if:
(i) the Consolidated Entity derives future assessable income of a nature and of an amount suffi cient to enable the benefi t to be
realised;
(ii) the Consolidated Entity continues to comply with the conditions for deductibility imposed by tax legislation; and
(iii) in relation to Australian carry forward income tax losses the Consolidated Entity is able to meet the continuity of ownership and/
or continuity of business tests.
The Company and controlled entities of the Company have not elected to consolidate for taxation purposes and have not entered into a
tax sharing and funding agreement in respect of such arrangements.
7. Assets and Liabilities Classifi ed as Held for Sale
a) Description
The Company having undertaken a strategic review of its operations during the year, and due to the legal dispute, the Board resolved
to seek a settlement which involves an exit of the operations in Indonesia.
The results of Land and Exploration and Evaluation of Berau Thermal Coal Project have been recorded in these fi nancial statements
as being held for sale. Under AASB 5 Non-current Assets Held for Sale and Discontinued Operations, an asset is either held for
recovery through use or for sale. As the Company is seeking settlement it has been classifi ed as held for sale. The impairment of
Berau Exploration and Evaluation to $4,021,028 is not a refl ection of its commercial value rather a result of a prolonged dispute
with the Indonesian partner which has excluded the possibility of a commercial sale. Related fi nancial information is set out below.
Further information is set out in note 4 – Segment Information and note 3(a) – Critical Accounting Estimates and Judgements/
Impairment of Assets Classifi ed as Held for Sale.
90
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
b) Assets classifi ed as held for sale
Land
Exploration and Evaluation
c) Liabilities directly associated with assets classifi ed as held for sale
Trade creditors
Provision
2011
$
2012
$
332,078
4,021,028
4,353,106
2012
$
2011
$
-
-
-
-
-
-
-
-
-
91
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. Cash and Cash Equivalents
Cash at bank
Term deposits
Consolidated Entity
2012
$
2,315,298
18,236,381
20,551,679
2011
$
1,651,165
32,525,164
34,176,329
Risk exposure
The Consolidated Entity’s exposure to interest rate risk is discussed in note 2. The maximum exposure to credit risk at the end of the
reporting period is the carrying amount of each class of cash and cash equivalents mentioned above.
9. Trade and Other Receivables
Current:
Amounts receivable from sundry debtors
Provision for doubtful debts
Loan to Cuervo Resources Inc
Provision for impairment
Goods and service tax (GST) recoverable in Australia
Prepayments
Non-Current:
Amounts receivable from sundry debtors
Loans to associated entity (Apurimac Ferrum S.A.)
Provision for impairment*
Loan to Cuervo Resources Inc
Provision for impairment
Consolidated Entity
2012
$
2011
$
535,537
-
5,216,470
(2,203,269)
3,548,738
19,674
15,045
3,583,457
697,759
(32,675)
-
-
665,084
9,152
14,025
688,261
539
55
33,160,045
25,714,498
(33,134,249)
(25,714,498)
-
-
26,335
97,751
-
97,806
*
2010 - $8,559,441 of this loan was provided for while the entity was a subsidiary.
Refer to Note 2 for the Consolidated Entity’s exposure to credit risk, foreign exchange risk and interest rate risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. Financial Assets at Fair Value through Profi t or Loss
Financial assets at fair value through profi t or loss are held for trading and include the following:
Investments comprise:
Current:
Cuervo Resources Inc. warrants – initial recognition
Add: net change in fair value
Non-current:
Financial assets at fair value through profi t and loss
Cuervo Resources Inc. shares – at cost
Add: net change in fair value
Consolidated Entity
2012
$
2011
$
3,697,727
(1,955,474)
1,742,253
214,563
(100,199)
114,364
-
-
-
-
-
-
Changes in fair value of fi nancial assets at fair value through profi t or loss are recorded as an expense in the current reporting period (Note
1(m)). The fair value of listed shares in fi nancial assets at fair value through profi t or loss has been determined directly by reference to bid
prices in an active market.
Information about the Consolidated Entity’s exposure to market and price risk is provided in Note 2(a).
11. Investments Accounted for using the Equity Method
Apurimac Ferrum S.A. (“AF”) is a company incorporated and domiciled in Perú, South America. During the fi nancial year Strike Resources
Limited’s shareholding in AF decreased from 56% as at 30 June 2011 to 50% on 22 June 2012. Due to the operation of a series of agreements
between the AF shareholders executed between 21 July and 5 August 2009 Strike is not deemed to control AF pursuant to AASB 127
Consolidated and Separate Financial Statements and therefore does not consolidate the accounts of AF.
Summarised fi nancial information of associate entity:
The Consolidated Entity’s share of the results of its associate and its’ aggregate assets and liabilities are as follows:
Apurimac Ferrum S.A.
2012
2011
Ownership
interest1
$
Assets
$
Liabilities
$
Loss
$
50%
56%
16,487,774
11,441,652
18,987,832
12,108,636
1,826,840
941,005
1Strike Resources Limited decreased its shareholding in Apurimac Ferrum S.A. from 56% to 50% on 22 June 2012.
Consolidated Entity’s share of associate losses not bought to account:
Opening share of carry-forward losses
Current year share of loss
Closing share of carry-forward losses
2012
$
1,741,520
1,826,840
3,568,360
2011
$
800,515
941,005
1,741,520
The Consolidated Entity’s share of the associate’s loss has not been brought to account as the investment in the associate is fully impaired,
refer Note 1(b) and 3(d).
92
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. Property, Plant and Equipment
At 1 July 2010
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
2011 Consolidated
Carrying value at 1 July 2010
Adj. to opening balance
Additions to CWIP
Transfers out of CWIP
Transfers from CWIP
Depreciation expense
Cost of asset disposals
Accumulated depreciation on disposed assets
93
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Capital WIP
Land
Plant and
equipment
Leasehold
improvements
$
$
$
$
Total
$
218,856
678,267
-
-
218,856
678,267
510,068
(236,111)
273,957
95,935
(29,301)
66,634
1,503,126
(265,412)
1,237,714
273,957
66,634
218,856
(102,891)
35,252
(150,257)
-
-
-
-
678,267
(37,628)
-
-
-
-
-
-
-
-
-
30,853
(125,103)
(217,518)
143,046
105,235
219,755
(114,520)
105,235
105,235
(29)
-
-
27,513
(70,063)
(77,905)
59,999
-
44,750
169,323
(124,573)
44,750
-
-
-
119,070
(21,526)
(93,262)
31,710
1,237,714
(140,519)
35,252
(150,257)
149,923
(146,629)
(310,780)
174,756
102,626
849,460
121,743
(19,117)
102,626
983,097
(133,637)
849,460
102,626
849,460
-
-
-
14,936
(7,458)
(121,743)
25,900
-
14,261
14,936
(675)
14,261
(29)
41,769
(42,449)
42,449
(77,521)
(199,648)
85,899
(640,639)
59,291
184,539
(125,248)
59,291
Carrying value at 30 June 2011
960
640,639
At 30 June 2011
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
960
-
960
640,639
-
640,639
2012 Consolidated
Carrying value at 1 July 2011
Foreign exchange adjustment
Additions to CWIP
Transfers out of CWIP
Transfers from CWIP
Depreciation expense
Cost of asset disposals
Accumulated depreciation on disposed assets
Reclassed to Assets classified as held for sale
Carrying value at 30 June 2012
At 30 June 2012
Cost or fair value
Accumulated depreciation and impairment
Net carrying amount
960
-
41,769
(42,449)
-
-
-
-
-
280
280
-
280
640,639
-
-
-
-
-
-
-
(640,639)
-
-
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. Exploration and Evaluation Expenditure
Balance at the beginning of the year
Foreign exchange adjustment
Exploration and evaluation expenditure additions
Impairment loss – exploration and evaluation
Reclassed to assets classifi ed as held for sale
Balance at the end of the year
Consolidated Entity
2012
$
2011
$
8,239,883
21,129,916
(1,345,053)
-
2,134
577,877
(2,875,936)
(13,467,910)
(4,021,028)
-
-
8,239,883
The impairment of Berau Exploration and Evaluation to $4,021,028 is not a refl ection of its commercial value rather a result of a
prolonged dispute with the Indonesian partner which has excluded the possibility of a commercial sale.
The ultimate recoverability of deferred exploration and evaluation expenditure is dependent on the successful development or sale
of the relevant area of interest. Refer to Note 1 (o) (ii) & 3(b).
14. Trade and Other Payables
Current
Trade creditors
Other creditors and accruals
Non Current
Loan from associate
Consolidated Entity
2012
$
2011
$
95,635
403,516
499,151
504,781
2,280,704
2,785,485
219,395
132,999
Details of the Consolidated Entity’s exposure to risks arising from current payables are set out in Note 2.
15. Provisions
Current
Provision for employee entitlements – annual leave
Other
Consolidated Entity
2012
$
2011
$
61,306
112
61,418
56,545
-
56,545
94
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. Issued Capital
142,534,268 (2011: 133,534,268) fully-paid ordinary shares
Each fully-paid, ordinary share carries one vote per share and the right to participate in dividends.
Consolidated Entity
2012
$
2011
$
148,109,255
145,632,412
Movement in ordinary share capital
At 1 July 2010
Date of
movement
No.
$
130,034,268
144,846,669
Shares issued on exercise of options
11 Feb 2011
3,500,000
789,667
(3,924)
-
133,534,268
145,632,412
-
235,303
5 Aug 2011
9,000,000
2,250,000
-
(8,460)
142,534,268
148,109,255
95
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Share issue expenses
At 30 June 2011
Shares issued on exercise of options
Share issued
Share issue expenses
At 30 June 2012
Ordinary share
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the
number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.
Options
Information relating to the Strike Resources Limited Employee Option Plan, including details of options issued, exercised and lapsed
during the financial year and options outstanding at the end of the reporting period, is set out in note 28.
Capital risk management
The Consolidated Entity’s objectives when managing capital are to safeguard their ability to continue as a going concern so that they
can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure the Consolidated Entity may return capital to shareholders, issue new shares or
sell assets to reduce debt. The Consolidated Entity’s non-cash investments can be realised to meet accounts payable arising in the
normal course of business.
17. Reserves
Foreign currency translation reserve
Share-based payments reserve
Consolidated Entity
2012
$
(1,186,121)
13,191,026
12,004,905
2011
$
(630,900)
12,780,333
12,149,433
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Nature and Purpose of Other Reserves
(i) Share-Based Payment
The share-based payments reserve records the consideration (net of expenses) received by the Company on the issue of
options. In relation to options issued to Directors and employees for nil consideration, the fair values of these options are
included in the share-based payments reserve.
(ii) Foreign Currency Translation
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation
reserve as described in Note 1(d) and accumulate in a separate reserve within equity. The cumulative amount is reclassifi ed
to profi t or loss when the net investment is disposed of.
2012 - Movement in share-based payment reserve
Grant
No.
$
The number of unlisted options outstanding over unissued ordinary shares at the
reporting date is as follows:
Consolidated Entity
Opening balance at 1 July 2011
Granted options
Employee Options
Unlisted options exercisable at $0.36; expiring 23 Nov 16
Unlisted options exercisable at $0.42; expiring 23 Nov 16
Unlisted options exercisable at $0.56; expiring 23 Nov 16
Unlisted options exercisable at $0.36; expiring 23 Nov 16
Unlisted options exercisable at $0.42; expiring 23 Nov 16
Unlisted options exercisable at $0.56; expiring 23 Nov 16
Lapsed options
Other Options
Lapsed options exercisable at $0.938; expired 21 Jul 11
Lapsed options exercisable at $0.938; expired 13 Sep 11
Lapsed options exercisable at $2.788; expired 7 Mar 12
Lapsed options exercisable at $2.078; expired 7 Mar 12
Lapsed options exercisable at $3.978; cancelled 7 Oct 11
Lapsed options exercisable at $2.75; expired 29 Jul 11
Lapsed options exercisable at $1.30; cancelled 23 Nov 11
Lapsed options exercisable at $1.50; cancelled 23 Nov 11
Lapsed options exercisable at $1.75; cancelled 23 Nov 11
Lapsed options exercisable at $2.75; expired 4 Mar 12
Lapsed options exercisable at $0.36; cancelled 12 Apr 12
Lapsed options exercisable at $0.42; cancelled 12 Apr 12
Lapsed options exercisable at $0.56; cancelled 12 Apr 12
Lapsed options exercisable at $2.878; expired 1 May 12
Closing balance at 30 June 2012
24 Nov 11
24 Nov 11
24 Nov 11
5 Apr 12
5 Apr 12
5 Apr 12
17,786,404
12,780,333
1,416,668
1,416,666
1,416,666
333,334
333,333
333,333
(4,600,000)
(500,000)
(3,300,000)
(500,000)
(500,000)
(903,404)
(400,000)
(400,000)
(400,000)
(250,000)
(333,334)
(333,333)
(333,333)
(33,000)
120,386
111,456
95,106
30,365
28,458
24,922
-
-
-
-
-
-
-
-
-
-
-
-
-
-
10,250,000
13,191,026
96
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. Reserves (continued)
2011 - Movement in share-based payment reserve
Grant
No.
$
The number of unlisted options outstanding over unissued ordinary shares at the
reporting date is as follows:
Consolidated Entity
Opening balance at 1 July 2010
Granted options
Employee Options
20,086,404
12,991,282
Unlisted options exercisable at $1.30; expiring 23 Mar 13
Unlisted options exercisable at $1.50; expiring 23 Mar 13
Unlisted options exercisable at $1.75; expiring 23 Mar 13
6 May 11
6 May 11
6 May 11
400,000
400,000
400,000
Exercised options
Other Options
Unlisted options exercised at $0.178
Unlisted options exercised at $0.278
Lapsed options
13 Feb 07
13 Feb 07
(1,833,333)
(1,666,667)
9,264
8,698
6,432
-
-
Lapsed options exercisable at $0.178; expired 30 Jun 08
Closing balance at 30 June 2011
-
(235,343)
17,786,404
12,780,333
Nature Equity-based Remuneration
On 24 November 2011 and 5 April 2012 the Company granted 5,250,000 unlisted Employee Options with exercise prices of $0.36
(1,750,002), $0.42 (1,749,999) and $0.56 (1,749,999), vesting immediately. The expiry date of these options is 23 November 2016.
The fair value of these options are expensed over the period from their date of grant to each respective vesting date. The fair value
is calculated using a Black-Scholes options valuation model with an assumed volatility rate of 70.5% and 80.19% for the underlying
SRK shares (Note 28).
97
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Key Management Personnel Disclosures
a) Details of Key Management Personnel during the fi nancial year:
Current
Malcolm Richmond
Matthew Hammond
William Johnson
Tough Samantha
Ken Hellsten
Julian Tambyrajah
Ian Cullen
Past
David Lim
Mark Horn
Farooq Khan
Mike Lowry
H. Shanker Madan
Farhad Moshiri
Andrew Napier
Chairman/Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Managing Director
Chief Financial Offi cer (appointed 2 April 2012)
General Manager Exploration and Development (appointed 1 July 2011 and ceased on 15 July
2012)
Chief Financial Offi cer (ceased on 10 April 2012)
Alternate Director for Mr F Moshiri (ceased 3 February 2011)
Non-Executive Director (ceased 3 February 2011)
General Manager – Berau (ceased 30 April 2011)
Non-Executive Chairman (ceased 3 February 2011)
Non-Executive Director (ceased 3 February 2011)
Process Engineer (ceased 29 April 2011)
b) Compensation of Key Management Personnel
Short-term employee benefi ts
Post-employment benefi ts
Long-term benefi ts
Termination benefi ts
Share-based payments
Detailed remuneration disclosures are provided in the remuneration report on pages 37 to 48.
Consolidated Entity
2012
$
1,238,292
96,324
-
-
2011
$
1,366,161
156,278
-
-
333,764
12,197
1,668,380
1,534,636
98
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Key Management Personnel Disclosures (continued)
c) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration are disclosed in the Remuneration Report section of the Directors’ Report.
There were no shares issued on the exercise of these options during the financial year.
(ii) Options holdings
The numbers of options over ordinary shares in the Company held during the financial year by each director of Strike
Resources Limited and other key management personnel of the Consolidated Entity, including their personally related
parties, are set out below:
Balance at
1 July 2011
Balance at
appointment
Granted as
compensation
Net change
other7
Balance at
30 June 2012
Vested and
exercisable
Unvested
2012
M Richmond
M Hammond
W Johnson
S Tough1
K Hellsten
J Tambyrajah2
I Cullen4
D Lim3
Total
1,700,000
-
1,240,000
-
-
-
-
600,000
-
-
-
-
-
-
-
-
-
-
-
-
1,500,000
1,000,000
750,000
(1,100,000)
600,000
600,000
-
-
-
(850,000)
390,000
390,000
-
-
-
-
-
-
1,500,000
1,500,000
1,000,000
1,000,000
750,000
750,000
1,000,000
(1,600,000)
-
-
3,540,000
-
4,250,000
(3,550,000)
4,240,000
4,240,000
-
-
-
-
-
-
-
-
-
1. Ms Tough was appointed as Non-Executive Director on 23 January 2012.
2. Mr Tambyrajah was appointed as Chief Financial Officer on 2 April 2012.
3. Mr Lim ceased his position as the Chief Financial Officer on 10 April 2012.
4. Mr Ian was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
99
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Balance at
1 July 2010
Balance at
appointment
Granted as
compensation
Net change
other7
Balance at
30 June 2011
Vested and
exercisable
Unvested
2011
M Hammond
M Horn1
K Hellsten
W Johnson
F Khan2
D Lim
M Lowry3
H S Madan4
F Moshiri5
A Napier6
M Richmond
Total
-
-
-
1,240,000
3,050,000
-
250,000
6,130,000
-
-
1,700,000
12,370,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
-
-
-
-
-
-
-
-
-
(3,050,000)
-
-
(6,130,000)
-
-
-
-
-
-
-
-
-
1,240,000
1,240,000
-
600,000
250,000
-
600,000
250,000
-
-
-
-
-
-
1,700,000
1,700,000
600,000
(9,180,000)
3,790,000
3,790,000
-
-
-
-
-
-
-
-
-
-
-
-
1. Mr Horn ceased holding the offi ce of alternate director on 3 February 2011.
2. Mr Khan ceased holding the offi ce of director on 3 February 2011.
3. Mr Lowry ceased as a member of Key Management Personnel on 30 April 2011.
4. Mr Madan ceased holding the offi ce of director on 3 February 2011.
5. Mr Moshiri ceased holding the offi ce of director on 3 February 2011.
(iii) Share holdings
6. Mr Napier was deemed to be a member of Key Management Personnel from 7 July
7.
2010 to 29 April 2011.
Figures in “net change other” column represent fi nal holding when the individual
ceased being a KMP.
The numbers of shares in the Company held during the fi nancial year by each director of Strike Resources Limited and
other key management personnel of the Consolidated Entity, including their personally related parties, are set out below.
There were no shares granted during the reporting period as compensation.
100
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2012
M Richmond
M Hammond
W Johnson
S Tough1
K Hellsten
J Tambyrajah2
I Cullen4
D Lim3
Total
Balance at
beginning of the
year
Received during the
year on the exercise
of options
Net change
other
Balance at
the end of the
year
100,000
-
-
-
187,083
-
-
38,100
325,183
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
-
30,000
217,083
-
-
(38,100)
(8,100)
-
-
-
317,083
1. Ms Tough was appointed as Non-Executive Director on 23 January 2012.
2. Mr Tambyrajah was appointed as Chief Financial Offi cer on 2 April 2012.
3. Mr Lim ceased his position as Chief Financial Offi cer on 10 April 2012.
4. Mr Ian was appointed as General Manager Exploration and Development on 1 July 2011 and ceased on 15 July 2012.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18. Key Management Personnel Disclosures (continued)
101
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2011
M Hammond
K Hellsten
M Horn4
W Johnson
F Khan1
D Lim
M Lowry2
H S Madan3
F Moshiri4
A Napier5
M Richmond
Total
Balance at
beginning of year
Received during the
year on the exercise
of options
Net change other
Balance at
the end of the year
-
187,083
-
-
13,941,605
38,100
-
496,343
-
-
100,000
14,763,131
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(13,941,605)
-
-
(496,343)
-
-
-
(14,437,948)
-
187,083
-
-
-
38,100
-
-
-
-
100,000
325,183
1. Mr Khan ceased being a director on 3 February 2011.
2. Mr Lowry ceased being a member of Key Management Personnel on 30 April 2011.
3. Mr Madan ceased being a director on 3 February 2011.
4. Mr Moshiri ceased be a director on 3 February 2011. (Mr. Horn was alternate director for Mr Moshiri).
5. Mr Napier was deemed to be a member of Key Management Personnel from 7 July 2010 to 29 April 2011.
d) Loans to Key Management Personnel
There were no loans to Key Management Personnel (or their personally-related entities) during the financial year.
e) Other Transactions with Key Management Personnel
During the year, the Company paid Mrs Helen Hellsten, a related party of Mr Ken Hellsten, $5,668 for services provided during the
year. There were no other transactions with Key Management Personnel (or their personally-related entities) during the financial
year.
19. Auditors’ Remuneration
Auditors of the Consolidated Entity
Audit and review of financial statements
- BDO Audit (WA) Pty Ltd
Other services – technical updates
- BDO (WA) Pty Ltd
Auditors of the Perúvian subsidiaries
Audit and review of financial statements
- BDO Pazos, Lopez de Romana, Rodriguez
Consolidated Entity
2012
$
2011
$
84,774
51,934
-
795
6,830
91,604
7,187
59,916
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Contingent Assets and Liabilities
a) Strike Resources Perú S.A.C. option
e) Berau Thermal Coal Project Royalties
Strike Resources Perú S.A.C. (the Company’s
Perúvian subsidiary) granted Apurimac Ferrum S.A.
an option over its mining concessions exercisable
for US$1.75 million.
b) Cristoforo Agreement
On 15 June 2010, Strike Resources Perú S.A.C. (“Strike
Perú”) entered into an assignment of mining rights
and option agreement with the Perúvian owner of
three mineral concessions in the Apurimac District
totalling 1,900 hectares, being the Cristoforo 14,
Cristoforo 28 and Ferroso 29 concessions (“Cristoforo
Agreement”). The consideration paid (and payable)
under the agreement was US$31,250 (paid on
execution), US$50,000 payable within 12 months
and 15 business days from execution, US$50,000
payable within 6 months thereafter and a further
US$1.05 million is payable if Strike Perú exercises the
option to acquire the concessions. The option may
be exercised on or before 13 June 2013. Under the
terms of the AF Settlement Agreement Strike Perú
was required to assign the Cristoforo Agreement to
Apurimac Ferrum S.A. (AF) for no consideration (other
than reimbursement of the money paid by Strike Perú
to the Cristoforo vendor). Accordingly, Strike Perú
assigned this option to AF on 15 March 2011.
c) Native Title
The Consolidated Entity’s tenements in Australia may
be subject to native title applications in the future. At
this stage it is not possible to quantify the impact (if
any) that native title may have on the operations of
the Consolidated Entity.
d) Government Royalties
The Consolidated Entity is liable to pay royalties on
production obtained from its mineral tenements/
concessions. For example, the applicable Government
royalties in Perú are between 1% to 3% based on the
value of production. At this stage it is not possible
to quantify the potential fi nancial obligation of the
Consolidated Entity under Government royalties.
102
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
The Consolidated Entity is liable to pay a royalty to
PT Kaltim Jaya Bara (“KJB”), the owner of the mining
concession on which the Consolidated Entity’s
Berau Thermal Coal Project is located. As a result of
changes to the Indonesian mining law it is unclear
if Strike would legally be able to pay this royalty
should it commence production at Berau. Due to
uncertainty created by the mining law changes and
issues concerning the estimation of such a royalty at
this stage of the project, it is not possible to quantify
the potential fi nancial obligation of the Consolidated
Entity to pay a royalty to KJB.
f) Directors’ Deeds
The Consolidated Entity has entered into deeds
indemnity with certain Strike Resources
of
Limited Directors,
indemnifying them against
liability incurred in discharging their duties as
Directors/offi cers of the Consolidated Entity. As
at the reporting date, no claims have been made
under any such indemnities and, accordingly, it
is not possible to quantify the potential fi nancial
obligation of the Consolidated Entity under these
indemnities.
g) Millenium Legal Dispute
On 20 December 2011 the Company announced
that a court in Lima has dismissed Millenium
Trading’s legal action against Strike’s joint venture
vehicle Apurimac Ferrum (AF). Millenium’s case
sought to invalidate a 2006 agreement under
which it relinquished options over certain mining
concessions to enable AF to buy them (Cancellation
Agreement). An appeal lodged by Millennium has
also been dismissed on procedural grounds.
Despite AF’s efforts the identity of the relevant
concession has not yet been agreed. AF therefore
commenced an arbitration to resolve this issue.
The arbitration is ongoing. A mining operation of
this kind by Milllenium will not materially affect
AF’s development plans.
103
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20. Contingent Assets and Liabilities (continued)
An arbitration hearing to define the issues in dispute was held on 27 April 2012. The arbitrator agreed with AF’s proposed
statement of the issues to be resolved. A further hearing was held on 16 May 2012 to consider certain questions about the
arbitrator’s jurisdiction before the substantive hearing to resolve the dispute could be scheduled.
Millenium has the right to conduct a small-scale mining operation on an AF concession, the identity of which is to be agreed.
As the parties have been unable to agree on the identity of the concession, AF referred the matter to arbitration. In early July
the arbitrator asked the parties to make submissions about which concession would be most suitable for Millenium to conduct
this operation. Submissions were made in August and a decision on this matter and the jurisdictional question is pending.
21. Commitments
a) Lease Commitments
Non-cancellable operating lease commitments:
not longer than one year
between 2 years and 5 years
Consolidated Entity
2012
$
2011
$
160,638
236,388
397,026
220,365
675,212
895,577
The Consolidated Entity leases an office in Perth, Australia under a non-cancellable operating lease with an expiry date between 2 and 4 years.
The lease rent is subject to a fixed 4.5% increase on each anniversary of the term. Strike is required to pay the annual outgoings incurred by
the lessor in respect of the premises. This figure varies on an annual basis.
b) Mineral Tenement/Concession/Mining Rights - Commitments for Expenditure
Australian tenements
In order to maintain current rights of tenure to exploration tenements, the holders of Australian mineral tenements
are required to outlay lease rentals and meet minimum expenditure commitments. In the financial year ended 30 June
2010 the Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd (“PMI”), a
subsidiary of ASX-listed Mineral Resources Limited. Under this agreement PMI is required to meet the minimum expenditure
commitments over the Australian tenements in which Strike holds an interest. Financial commitments for subsequent
periods are contingent upon the continuity of the farm-in arrangement with PMI, future exploration and evaluation results,
and as such cannot be reliably estimated.
Perúvian concessions
The Consolidated Entity is required to pay annual licence fees by 30 June of each year, at rates which vary on an amount
per-hectare basis. The total amount of this commitment will depend upon the area of concessions relinquished (if any)
and the area of new concessions granted (if any) and therefore cannot be reliably estimated. As a result of finalising the
arbitration process with the shareholders of Apurimac Ferrum S.A.(“AF”), the Consolidated Entity granted on option over
Perúvian tenements held by its subsidiary, Strike Resources Perú S.A.C. Under the terms of the AF Settlement Agreement
AF is obliged to make all necessary payments to keep the concessions in good standing. Financial commitments for
subsequent periods are contingent upon the continuity of the agreement with AF, future exploration and evaluation
results, and as such cannot be reliably estimated.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Australian heritage protection agreements
These agreements facilitate the preservation of Aboriginal heritage through the protection of Aboriginal sites and objects
upon the grant of mining tenements in Western Australia. The Heritage Protection Agreements require the Consolidated
Entity to conduct Aboriginal heritage surveys prior to conducting exploration that is not low-impact in nature and detail
procedures to be followed if an Aboriginal site is identifi ed.
Agreements with Perúvian landowners and community groups
The Company notes that holding a mineral concession in Perú does not grant automatic access to the surface land.
Notwithstanding an easement procedure is contemplated in Perúvian law, in practice, mining companies have to negotiate
and enter into private agreements with landowners/community groups in order to have access to their land for the purposes
of conducting mining activities (exploration, evaluation, development and mining). Multiple landowners/community groups
are affected by the Consolidated Entity’s proposed mining activities on a majority of the Consolidated Entity’s Perúvian
concessions. To date, approvals have been sought and obtained for drilling on a programme by programme basis.
Obtaining approvals from landowners/community groups can be a complicated and lengthy process. The Consolidated
Entity will have to commit funds to community groups and/or landowners to secure land access agreements to develop its
Perúvian projects. There can be no guarantees that such approvals will be obtained, or as to the terms upon which they
will be obtained. At this stage it is not possible to quantify the potential fi nancial obligation of the Consolidated Entity in
this regard.
22. Related-Party Disclosures
a) Subsidiaries
Interests in subsidiaries are set out in Note 23.
During the year $ nil (2011: $6,232,056) was loaned to subsidiaries to fund exploration activities.
b) Associates
Apurimac Ferrum S.A. is an associate as set out in Note 11.
Loans to associates - Apurimac Ferrum
On 21 July 2009, through the AF Settlement Agreement, Strike Resources Limited entered into a replacement loan agreement
with Apurimac Ferrum S.A.(“AF”) in which US$20 million may be advanced to AF to undertake exploration on the Apurimac
and Cusco Iron Ore projects. This loan is interest bearing (USD Monthly LIBOR rate + 2% per annum) as provided for under
the AF Settlement Agreement.
On 16 May 2012, Apurimac Ferrum S.A. entered into the AF Finance Agreement with Strike Finance Pty Ltd for a principal
amount US$6m, interest rate is 10% for principal amounts drawn and repaid before 31 December 2012 and 15% for principal
amounts repaid after 31 December 2012. The latest repayment date is 31 January 2014.
104
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22. Related-Party Disclosures (continued)
Balance at 1 July
Loans advanced
Interest charged
Loan and interest purchased from IAC (Iron Associates Corporation)
105
Loan and interest sold to D&C Group S.A.C
Expenses paid on behalf of AF
Reclassed to Expense Claim
Foreign exchange movements
Balance at 30 June
Less provision for impairment
Carrying value
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
2012
$
2011
$
25,714,498
14,957,202
9,310,500
607,044
7,663,226
348,399
-
5,086,334
(2,715,628)
-
543,578
1,164,800
(1,708,378)
-
1,408,431
(3,505,463)
33,160,045
33,134,249
25,796
25,714,498
25,714,498
-
Claimable expenses - Apurimac Ferrum
According to the Technical Service Agreement between Strike Resources Limited and Apurimac Ferrum S.A. (AF), Strike Resources
Limited will invoice AF expenses of personnel who provide services to AF. This has been effective since 10 November 2009.
Opening Balance
Reclassed from Loans to AF
Expenses paid on behalf of AF
Collected from AF
Closing Balance
Less provision for impairment
Carrying value
c) Transactions with related parties
Fees for services provided by:
- Ms Helen Hellsten a related party of Mr Ken Hellsten
- Mr Mark Horn, Alternate Director for Mr Farhad Moshiri
(paid to M Horn and Co, a business of which Mr Horn is a principal)
2012
$
2011
$
80,014
(26,433)
1,708,378
146,256
(1,741,052)
193,596
-
193,596
-
106,447
-
80,014
80,014
-
Consolidated Entity
2012
$
2011
$
5,668
-
-
33,600
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. Investment in Controlled Entities
Strike Finance Pty Ltd
Strike Australian Operations Pty Ltd
Strike Operations Pty Ltd (“SOPL”)
PT Indo Batubara (100% benefi cially owned by SOPL)
Strike Indo Operations Pty Ltd (“SIOPL”)
PT Orion Indo Mining (100% benefi cially owned by SIOPL)
Ferrum Holdings Limited
Strike Resources Perú S.A.C.
Country of
Incorporation
Percentage of Ownership
Australia
Australia
Australia
Indonesia
Australia
Indonesia
British Anguilla
Perú
2012
100%
100%
100%
100%
100%
100%
100%
100%
2011
100%
100%
100%
100%
100%
100%
100%
100%
24. Events Occurring after the Reporting Period
The Company announced on 31 July 2012 that Cuervo had commenced drilling at the Bob 1 project.
On 6 September 2012 the Company announced that AF had restructured the organisation in line with current programmes and as a
precursor to the result of the shootout. The shootout will result in one shareholder owning 100% of AF and therefore enabling AF to
be consolidated. The cost savings are estimated at approximately US$250k per month from the December quarter onwards.
The Consolidated Entity entered into a farm-in agreement with Process Minerals International Pty Ltd (“PMI”), a subsidiary of ASX
listed Mineral Resources Limited for the potential mining of iron ore from Strike’s Paulsens East project (EL47/1328 and PL47/1170)
located in the Pilbara. Under this agreement PMI has exclusive rights to explore for and mine iron ore from Paulsens East in return
Strike will pay a royalty of A$ 3.20 per dry tonne of ore mined. As this royalty is contingent on the successful development of a mine
and due to the uncertain nature of mine production it is not possible to quantify the potential fi nancial benefi t to the Consolidated
Entity of this royalty.
On 23 July PMI informally advised Strike that it intends to terminate the agreement, although it has not yet given a formal notice.
The Company is assessing its options in relation to this project.
There have been no further changes of signifi cance since then.
106
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25. Reconciliation of Profit after Income Tax to Net Cash Inflow from Operating
Activities
Operating profit/(loss) after tax
Interest received – Cuervo loan
Consulting fees
107
Non cash flows in profit/(loss) from ordinary activities:
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Depreciation - plant & equipment
Adjustment for movement in foreign exchange
Adjustment on deconsolidation of subsidiary
Fair value adjustments
Loan to associated entity
Loan to Cuervo Resources Inc.
Fair value through profit and loss financial assets
Available-for-sale financial assets
Investment in associate
Exploration and evaluation projects
Land
Directors’ and employees’ options
Loss on sale of fixed assets
Loss on sale of investments
Decrease/(increase) in assets:
Receivables
Increase/(decrease) in liabilities:
Trade creditors and accruals
Provisions
Net cash outflows from operating activities
26. Non–cash Investing and Financing Activities
Shares issued to acquire Apurimac Ferrum S.A.
Consolidated Entity
2012
$
2011
$
(13,040,722)
(24,891,619)
(3,697,727)
(835,942)
77,522
(1,011,269)
-
9,310,500
2,125,576
2,055,850
-
-
146,629
3,979,521
-
5,777,410
-
-
-
(2,268,015)
22,923
2,875,936
219,305
410,693
40,577
826,397
1,149,115
13,467,910
-
24,394
85,665
482,395
(362,162)
(1,604,161)
11,978
(14,182)
2,640,742
(661,289)
(984,747)
(1,671,303)
Consolidated Entity
2012
$
2011
$
2,250,000
-
On 5 August 2011, Strike Resources Limited issued 9,000,000 shares, as part of the acquisition costs, to Iron Associates Corporation
to acquire 12% share and US$5m debts of Apurimac Ferrum S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. Earnings per Share
(a) Basic earnings/(loss) per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operation
Total basic earnings per share attributable to the ordinary equity holders of the Company
(b) Diluted earnings/(loss) per share
From continuing operations attributable to the ordinary equity holders of the Company
From discontinued operation
Total diluted earnings per share attributable to the ordinary equity holders of the Company
(c) Reconciliations of earnings used in calculating earnings per share
Basic earnings per share
Loss attributable to the ordinary equity holders of the Company used in Calculating basic
earnings per share:
From continuing operations
From discontinued operation
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic
earnings per share
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted earnings per share
28. Share-Based Payments
Consolidated Entity
2012
cents
2011
cents
(9.20)
-
(9.20)
(9.20)
-
(9.20)
(18.95)
-
(18.95)
(18.95)
-
(18.95)
(13,040,722)
-
(24,891,619)
-
141,671,254
131,367,145
141,671,254
131,367,145
108
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
The establishment of the Strike Resources Limited Employee Option Plan was approved by shareholders on 6 November 2008. Options
granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share within
5 business days after the exercise. A total of 5,250,000 Employee Options were granted during the year (Note 17). The reasons for the
grant of these options to the employees are as follows:
(a) The options issue was designed to act as an incentive for the recipients to strive to achieve the Company’s goals with the aim of
enhancing shareholder value.
(b) The options provide an equity holding opportunity for the recipients which is linked to the Company’s share price performance.
(c) Based on the option exercise price and the rate at which the options vest, the exercise of the options by the recipient is
potentially only likely to occur if there is sustained upward movement in the Company’s share price.
(d) The number of options issued to recipients has been determined having regard to the level of employees’ salaries being paid and is
a cash-free, effective and effi cient way of providing an appropriate level of remuneration as well as providing ongoing equity-based
incentives for the recipients to remain with the Company with a view to improving the future growth of the Company.
(e) As a relatively-small company, with much of its available funds dedicated or committed to its resource projects (and also in
seeking opportunities in relation to the same), and in fi nancing its day to day working capital requirements, the Company is not
always in a position to maintain competitive cash salary ranges for its directors and employees within the industry in which it
operates.
Share-based payments expense
Consolidated Entity
2012
$
2011
$
410,693
24,394
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. Share-Based Payments (continued)
Grant date
Expiry date
Exercise
price
Balance
at start of
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
year
109
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Consolidated entity - 2012
21 Jul 06
13 Sep 06
7 Mar 07
7 Mar 07
5 Jun 07
3 Dec 07
4 Mar 08
14 Oct 08
21 Jul 11
12 Sep 11
7 Mar 12
7 Mar 12
1 May 12
3 Dec 12
4 Mar 13
13 Oct 13
25 Nov 09
25 Nov 12
25 Nov 09
25 Nov 12
25 Nov 09
25 Nov 12
6 May 11
6 May 11
6 May 11
24 Nov 11
24 Nov 11
24 Nov 11
5 Apr 12
5 Apr 12
5 Apr 12
23 Mar 13
23 Mar 13
23 Mar 13
23 Nov 16
23 Nov 16
23 Nov 16
23 Nov 16
23 Nov 16
23 Nov 16
0.938
0.938
2.788
2.078
2.878
3.978
2.878
2.75
2.50
2.75
3.25
1.30
1.50
1.75
0.36
0.42
0.56
0.36
0.42
0.56
4,600,000
500,000
3,300,000
500,000
33,000
4,000,000
250,000
250,000
750,000
750,000
750,000
400,000
400,000
400,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,600,000)
(500,000)
(3,300,000)
(500,000)
(33,000)
-
-
-
-
-
-
-
-
-
-
(500,000)
3,500,000
3,500,000
-
250,000
250,000
(250,000)
-
-
-
(400,000)
(400,000)
(400,000)
-
750,000
750,000
750,000
-
-
-
-
750,000
750,000
750,000
-
-
-
1,416,668
-
(333,334)*
1,083,334
1,083,334
1,416,666
1,416,666
333,334
333,333
333,333
-
-
-
-
-
-
(333,333)*
1,083,333
1,083,333
(333,333)*
1,083,333
1,083,333
-
-
-
333,334
333,333
333,333
333,334
333,333
333,333
(11,883,000)
10,250,000
10,250,000
16,883,000
5,250,000
Weighted-average exercise price
2.55
0.45
1.69
2.24
2.24
*
Options issued to individuals who ceased employment with Strike Resources Limited during the year, these options were not forfeited and did not lapse during
the year.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Grant date
Expiry date
Exercise
price
Balance
at start of
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
year
Consolidated entity - 2011
21 Jul 06
13 Sep 06
13 Feb 07
13 Feb 07
7 Mar 07
7 Mar 07
5 Jun 07
3 Dec 07
4 Mar 08
14 Oct 08
21 Jul 11
13 Sep 11
9 Feb 11
9 Feb 11
7 Mar 12
7 Mar 12
1 May 12
3 Dec 12
4 Mar 13
13 Oct 13
25 Nov 09
24 Nov 12
25 Nov 09
24 Nov 12
25 Nov 09
24 Nov 12
6 May 11
6 May 11
6 May 11
23 Mar 13
23 Mar 13
23 Mar 13
0.938
0.938
0.178
0.278
2.788
2.078
2.878
3.978
2.878
2.75
2.50
2.75
3.25
1.30
1.50
1.75
4,600,000
500,000
1,833,333
1,666,667
3,300,000
500,000
33,000
4,000,000
250,000
250,000
750,000
750,000
750,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
400,000
400,000
400,000
-
-
(1,833,333)
(1,666,667)
-
-
-
-
-
-
-
-
-
-
-
-
19,183,000
1,200,000
(3,500,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,600,000
4,600,000
500,000
500,000
-
-
-
-
3,300,000
3,300000
500,000
500,000
33,000
33,000
4,000,000
4,000,000
250,000
250,000
750,000
750,000
750,000
400,000
400,000
400,000
250,000
250,000
750,000
750,000
750,000
400,000
400,000
400,000
16,883,000
16,883,000
110
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
Weighted-average exercise price
2.06
1.52
0.23
2.55
2.55
*
Options issued to individuals who ceased employment with Strike Resources Limited during the year, these options were not forfeited and did not lapse during
the year.
No options were exercised during the period.
The weighted-average remaining contractual life of share options outstanding at the end of the period was 2.08 years (2011: 0.89 years).
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2012 was $0.086 for $0.36 options, $0.08 for
$0.42 options and $0.07 for $0.56 options (2011: $0.023 for $1.30 options, $0.022 for $1.50 options and $0.016 for $1.75 options). The fair
value at grant date is independently determined using the Black-Scholes option pricing model that takes into account the exercise
price, the term of the option, the share price at grant date, the expected price volatility of the underlying share, the expected dividend
yield and the risk-free interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2012 included:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28. Share-Based Payments (continued)
Options granted on 24 November 2011
a.
the options were granted for no consideration and vest immediately. Vested options are exercisable for a period of five years
after vesting.
b. exercise prices of $0.36, $0.42 and $0.56 (2011: $1.30, $1.50 and $1.75)
c. grant date: 24 November 2011 (2011: 6 May 2010)
d. expiry date: 23 November 2016 (2011: 23 March 2013)
e. share price at grant date: $0.185 (2011: $0.365)
f.
expected price volatility of the Company’s shares: 70.5% (2011: 68%)
g. expected dividend yield: 0% (2011: 0%)
h.
risk-free interest rate: 3.29% (2011: 5.145%)
Options granted on 5 April 2012
a.
the options were granted for no consideration and vest immediately. Vested options are exercisable for a period of four and a
half years after vesting.
b. exercise prices of $0.36, $0.42 and $0.56 (2011: $1.30, $1.50 and $1.75)
c. grant date: 5 April 2012 (2011: 6 May 2010)
d. expiry date: 23 November 2016 (2011: 23 March 2013)
e. share price at grant date: $0.180 (2011: $0.365)
f.
expected price volatility of the Company’s shares: 80.19% (2011: 68%)
g. expected dividend yield: 0% (2011: 0%)
h.
risk-free interest rate: 3.555% (2011: 5.145%)
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
111
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. Parent Entity Information
The following details information related to the parent entity, Strike Resources Limited, at 30 June 2012 and 30 June 2011. The information
presented here has been prepared using consistent accounting policies as presented in Note 1.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity
Accumulated losses
Option reserve
Profi t/(loss) for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
The parent entity does not have any contingent assets or liabilities.
2012
$
2011
$
25,633,433
34,670,794
199,990
19,023,382
25,833,423
53,694,176
112
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
395,249
2,793,971
-
-
395,249
2,793,971
25,438,174
50,900,205
148,109,255
145,632,412
(135,862,107)
(107,512,540)
13,191,026
12,780,333
25,438,174
50,900,205
(28,114,264)
(27,831,215)
(235,303)
235,341
(28,349,567)
(27,595,874)
DIRECTORS’ DECLARATION
In the Directors’ opinion:
a) The Financial Statements, comprising the Consolidated Statement of Comprehensive Income, Consolidated Statement of
Financial Position, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows and accompanying
notes as set out on pages 59 - 112 above, are in accordance with the Corporations Act 2001, and:
(i)
comply with Accounting Standards and the Corporations Regulations 2001;
(ii) give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2012 and of its performance for the
financial year ended on that date;
b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable; and
c) The remuneration disclosures set out in the Directors’ Report on pages 26 - 49 (as the audited Remuneration Report) comply
with section 300A of the Corporations Act 2001.
Note 1 confirms that the Financial Statements also comply with the International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The Directors have been given the declarations by the Managing Director (the person who performs the chief executive function)
and the Chief Financial Officer as required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
113
2
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0
2
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R
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P
E
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L
A
U
N
N
A
Ken Hellsten
Managing Director
25 September 2012
INDEPENDENT AUDITOR’S REPORT
Tel: +8 6382 4600
Fax: +8 6382 4601
www.bdo.com.au
38 Station Street
Subiaco, WA 6008
PO Box 700 West Perth WA 6872
Australia
114
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF STRIKE RESOURCES LIMITED
We have audited the accompanying financial report of Strike Resources Limited, which comprises
the consolidated statement of financial position as at 30 June 2012, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from
time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act
2001 and for such internal control as the directors determine is necessary to enable the preparation
of the financial report that gives a true and fair view and is free from material misstatement,
whether due to fraud or error. In Note 1(a)(i), the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements
comply with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the
company’s preparation of the financial report that gives a true and fair view in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001,
which has been given to the directors of Strike Resources Limited, would be in the same terms if
given to the directors as at the time of this auditor’s report.
BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050
110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited
by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards
Legislation (other than for the acts or omissions of financial services licensees) in each State or Territory other than Tasmania.
INDEPENDENT AUDITOR’S REPORT
Opinion
In our opinion:
(a) the financial report of Strike Resources Limited is in accordance with the Corporations Act
2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June
2012 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
(b) the financial report also complies with International Financial Reporting Standards as disclosed
in Note 1(a)(i).
Emphasis of Matter
Without qualifying our audit opinion, we draw attention to the matter disclosed in Note 1(l) and
Note 13. There remains a dispute as to the mining rights of the Berau coal concession. Given this
dispute there may be uncertainty as to the recoverability of the exploration and evaluation
expenditure assets, which are classified as held for sale assets, of Strike Resources Limited. The
recoverability of the exploration and evaluation expenditure assets is dependent upon successful
resolution of this dispute and the successful development and commercialisation of the underlying
areas of interests or their sale. This material uncertainty may cast doubt about the company’s
ability to realise the asset at the values stated in the statement of financial position. Our opinion is
not qualified in respect of this matter.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30
June 2012. The directors of the company are responsible for the preparation and presentation of
the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Strike Resources Limited for the year ended 30 June
2012 complies with section 300A of the Corporations Act 2001.
115
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
BDO Audit (WA) Pty Ltd
Brad McVeigh
Director
Perth, Western Australia
Dated this 25th day of September 2012
SECURITIES INFORMATION
The information in this section is current as at 2 October 2012
Issued Capital
Class of Security
Quoted
Not Quoted
Total
Fully-paid, ordinary shares
142,534,268
$3.978 (2 December 2012) director options
$2.878 (3 March 2013) employee options
$2.50 (24 November 2012) director options
$2.75 (24 November 2012) director options
$3.25 (24 November 2012) director options
$0.36 (23 November 2016) employee options
$0.42 (23 November 2016) employee options
$0.56 (23 November 2016) employee options
-
-
-
-
-
-
-
-
3,500,000
250,000
750,000
750,000
750,000
1,416,668
1,416,666
1,416,666
142,534,268
3,500,000
250,000
750,000
750,000
750,000
1,416,668
1,416,666
1,416,666
Total
142,534,268
10,250,000
152,784,268
Distribution of Fully-Paid, Ordinary Shares
Spread of Holdings
Number of Holders
Number of Units
% of Issued Capital
116
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,000 - and over
Total
Unmarketable Parcels
464
1,043
419
599
102
209,722
3,238,690
3,439,073
20,304,818
115,341,965
2,627
142,534,268
0.15
2.27
2.41
14.25
80.92
100%
Spread of Holdings
Number of Holders
Number of Units
% of Issued Capital
1 – 4,545
4,546 - over
Total
1,347
1,280
2,627
2,652,837
139,881,431
142,534,268
1.86
98.14
100%
SECURITIES INFORMATION
Top 20 Holders of Fully-Paid, Ordinary Shares
Rank
Shareholder
Total Shares
117
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
HSBC Custody Nominees (Australia) Ltd
Orion Equities Limited
Database Systems Ltd
J P Morgan Nominees Australia Ltd
Ferrous Resources Ltd
Nefco Nominees Pty Ltd
Alara Resources Limited
Merrill Lynch (Aust) Nominees Pty Limited
National Nominees Ltd
Mr Nicholas Kenos & Mrs Pauline Kenos
Pater Investments Pty Ltd
Mr Gordon Anthony
Paul Lay
Empire Holdings Pty Ltd
Aliana Pty Ltd
Citicorp Nominees Pty Limited
ACN 139 886 025 Pty Ltd
Katana Asset Management Ltd
Matthew Norman Bull
20
Renmuir Holdings Limited
Total
Substantial Shareholders
36,856,391
16,690,802
10,907,090
6,754,517
6,370,000
5,352,914
3,573,889
2,465,000
1,646,500
1,200,000
1,125,000
800,000
740,000
700,000
700,000
699,279
612,895
600,000
565,670
487,439
% of Capital
25.86
11.71
7.65
4.74
4.47
3.76
2.51
1.73
1.16
0.84
0.79
0.56
0.52
0.49
0.49
0.49
0.43
0.42
0.4
0.34
98,847,386
69.36
Last
Substantial
Holder Notice
Substantial Shareholder(s)
Registered Holder(s)
Total Shares
% of Issued
Capital
12-Dec-09
USM Steel and Mining Group
HSBC Custody Nominees (Australia) Ltd
& NEFCO Nominees
1-May-12
Azhar Chaudhri and Associates
Orion Equities Limited
12-Aug-08
Database Systems Ltd, Ambreen Chaudhri
Database Systems Ltd
25,825,000
17,178,261
9,377,090
18.12
12.05
6.58
MINERAL TENEMENTS
Apurimac Ferrum S.A. Concessions
Strike Resources has a 50% interest in the Apurimac Ferrum S.A. (AF) concessions at Apurimac and Cuzco, through its 50% interest in AF.
Apurimac Project, Perú – AF
Concession Name
Area
(Ha)
Province
Code
Title
File Number
(1)
(2)
(3)
(4)
(5)
(6)
Opaban I
Opaban III
Los Andes I
Pitumarca II
Lucrecia Esperanza
Nueva Oropampa 6
(7) Mapsa 2001
(8)
(9)
Coriminas II
Coriminas V
(10)
Ferrum 1
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
Ferrum 2
Ferrum 3
Ferrum 4
Ferrum 5
Ferrum 7
Ferrum 8
Ferrum 9
Ferrum 10
Ferrum 11
(20)
Ferrum 13
(21)
Ferrum 26
(22)
Ferrum 27
(23)
Ferrum 36
(24) Cristoforo 22
(25)
Ferrum 28
(26)
Ferrum 29
(27)
Ferrum 30
(28)
Ferrum 31
(29)
Ferrum 32
(30)
Ferrum 33
(31)
Ferrum 34
(32)
Ferrum 35
(33)
Ferrum 37
(34)
Ferrum 56
(35)
Ferrum 57
(36)
Ferrum 58
999
990
999
1,000
66
400
800
1,000
1,000
965
1,000
1,000
1,000
959
437
900
1,000
1,000
1,000
600
827
1,000
1,000
379
1,000
1,000
963
327
900
900
800
1,000
695
1,000
1,000
1,000
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
05006349X01
No 8625-94/RPM Dec 16, 1994
05006351X01
No 8623-94/RPM Dec 16, 1994
05006372X01
No 0134-95-RPM Jan 31, 1995
05006385X01
No 8686-94-RPM Dec 22, 1994
01-00649-99
No 00623-2001-INACC/J Jul 26, 2001
01-00860-99
No 04043-2000-RPM Oct 13, 2000
01-01204-01
No 00590-2002-INACC/J Apr 8, 2002
01-01624-99
No 02760-2000-RPM Jul 25, 2000
01-01626-99
No 0936-00-RPM Mar 16, 2000
01-02983-04
No 00228-2005-INACC/J Jan 19, 2005
01-02984-04
No 00227-2005-INACC/J Jan 19, 2005
01-02985-04
No 00229-2005-INACC/J Jan 19, 2005
Andahuaylas/ Aymaraes
01-02986-04
No 00230-2005-INACC/J Jan 19, 2005
Aymaraes
Aymaraes
01-02987-04
No 00323-2005-INACC/J Jan 25, 2005
01-02989-04
No 00396-2005-INACC/J Jan 27, 2005
Andahuaylas
01-02990-04
No 00232-2005-INACC/J Jan 19, 2005
Aymaraes
Aymaraes
Aymaraes
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
Andahuaylas
01-02991-04
No 00326-2005-INACC/J Jan 25, 2005
01-02992-04
No 00325-2005-INACC/J Jan 25, 2005
01-02993-04
No 02512-2005-INACC/J Jun 16, 2005
01-03139-06
No 4416-2006-INACC/J Oct 16, 2006
01-02274-07
No 000853-2007-INGEMMET/PCD/PM Sept 7, 2007
01-02629-07
No 000581-2007-INGEMMET/PCD/PM Sept 5, 2007
10553307
RP 0176-2008-INGEMMET/PCD/PM Feb 29, 2008
01-01656-02
RP2849-2007-INGEMMET/PCD/PM Dec 13, 2007
10507407
RP0601-2008-INGEMMET/PCD/PCM Mar 07, 2008
10507507
RP0365-2008-INGEMMET/PCD/PM Mar 07, 2008
10525907
PP 1024-2008-INGEMMET/PCD/PM May 05, 2008
10552807
RP 1266-2008-INGEMMET/PCD/PM May 12, 2008
10552907
RP0402-2008-INGEMMET/PCD/PM Mar 07, 2008
10553007
RP0547-2008-INGEMMET/PCD/PM Mar 07, 2008
10553107
RP0764-2008-INGEMMET/PCD/PM Apr 17, 2008
10553207
RP0347-2008-INGEMMET/PCD/PCM Mar 07, 2008
10621507
10133508
10133608
10133708
RP 1164-2008-INGEMMET/PCD/PM May 12, 2008
RP 1971-2008-INGEMMET/PCD/PM Jun 19, 2008
RP 3279-2008-INGEMMET/PCD/PM Sept 9, 2008
RP 2206-2008-INGEMMET/PCD/PM 27 Jun, 2008
20001465
20001464
200001481
20001478
11032475
11032603
11032600
11032965
20003140
11053798
11053836
11053807
11053810
11053816
11053822
11053827
11053830
11053833
11053835
11061068
11073793
11073799
11075418
11067786
11075423
11075419
11076757
11076509
11075425
11075421
11075427
11075426
11076534
11077123
11081417
11077127
118
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
MINERAL TENEMENTS
Apurimac Ferrum S.A. Concessions (continued)
Apurimac Project, Perú – AF (continued)
Concession Name
(37)
Ferrum 59
(38)
Ferrum 61
(39) Pacunco 1
119
(40) Minas Huaycco
2
1
0
2
T
R
O
P
E
R
L
A
U
N
N
A
(41)
Roncco
(42)
Ferrum 12
(43)
Sillaccassa 3
(44)
Ferrum 21
(45) Cassio 100
(46)
Ferrum 25
(47)
Ferrum 19
(48)
Ferrum 6
(49)
Ferrum 64
(50)
Ferrum 20
(51)
Ferrum 16
(52)
Ferrum 38
Area
(Ha)
1,000
1,000
800
800
400
700
200
999
400
1,000
1,000
1,000
600
800
1,000
800
Cusco Project, Perú – AF
Concession Name
Flor de María
Delia Esperanza
Julia Clara
El Pacífi co I
El Pacífi co II
Ferrum 14
Ferrum 15
Ferrum 17
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
Ferrum 18
Area
(Ha)
907
1,000
1,000
618
1,000
268
992
500
800
Province
Code
Title
File Number
Andahuaylas
10133808
RP 2272-2008-INGEMMET/PCD/PM 27 Jun, 2008
11077122
Aymaraes
10073308
-
Andahuaylas
10019508
RP 1806-2008-INGEMMET/PCD/PM May 29, 2008
Abancay
Aymaraes
Andahuaylas
Andahuaylas
10168708
RP 2541-2008-INGEMMET/PCD/PM Aug 08, 2008
10521708
Notifi cation 153150-2008 INGE<